Refer to Figure 9.1 for the Following Questions

question 21

Multiple Choice

Refer to Figure 9.1 for the following questions.
Figure 9.1

-In Figure 9.1, if the economy is at point L, what will happen?

• A)Inventories have fallen below their desired level and firms decrease production.
• B)Inventories have fallen below their desired level and firms increase production.
• C)Inventories have risen above their desired level and firms decrease production.
• D)Inventories have risen above their desired level and firms increase production.

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Definitions:

Diseconomies of Scale

An economic concept where, beyond a certain point, an increase in the scale of production leads to a rise in average costs per unit due to inefficiencies.

Long Run

A term in economics referring to a period wherein all inputs can be adjusted, including those that are typically fixed in the short run.

Variable Costs

Charges that adjust directly in response to the quantity of production or output.

Average Total Cost

The total cost divided by the quantity of output produced, representing the cost per unit of output.