If a Firm Has a U-Shaped Long-Run Average Cost Curve

question 199

Multiple Choice

If a firm has a U-shaped long-run average cost curve,

• A) its fixed cost rises as output rises.
• B) it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production.
• C) it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production.
• D) the firm can maximize its output by operating at the point of minimum long-run average cost.

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Definitions:

Consumption Bundle

A mix of various goods and services selected by consumers based on their preferences and budget limitations.

Slope

The rate at which one variable changes in relation to another, representing the steepness of a line on a graph.

Indifference Curves

Graphical representations of different bundles of goods between which a consumer is indifferent, showing preferences.

Consumption Bundle

A set of goods or services that an individual considers purchasing, given their income and the prices of those goods/services.