Figure 7-13 -AC Is Lower in the Long Run Than in the Than

question 144

Multiple Choice

Figure 7-13
-AC is lower in the long run than in the short run because

• A)prices often fall, allowing savings on purchases.
• B)inputs can be combined more efficiently in the long run.
• C)over time the prices of all inputs tend to decrease.
• D)AFC falls with output over all ranges of output.

Understand the concepts and differences between mutually exclusive and independent projects.

Gain knowledge on capital budgeting decisions and the factors influencing these decisions.

Understand the concept of discounted cash flow valuation and its relevance to investment appraisal.

Recognize the limitations and applications of Average Accounting Return (AAR) in investment decisions.

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Definitions:

Quantity Supplied

The amount of a good that producers are willing and able to sell at a given price.

Quantity Demanded

Reflects the total amount of a product that consumers are willing to buy at a given price point, during a specified time period.

Competitive Market

A market structure characterized by a large number of small firms, free entry and exit, and a homogeneous product, where no single firm can influence the market price.

Equilibrium

A condition or state in which market supply and demand balance each other, and as a result, prices become stable.