The Effect of Spreading Out the Fixed Costs Outweighing the Effect

question 177

Multiple Choice

The effect of spreading out the fixed costs outweighing the effect of diminishing returns is illustrated by the ________ average cost curve ________.

• A) long-run; decreasing
• B) long-run; increasing
• C) short-run; decreasing
• D) short-run; increasing

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Definitions:

Unemployment

The situation where individuals who are capable of working and are actively seeking employment are unable to find a job.

Binding Price Ceiling

A government-imposed maximum price on goods or services that is set below the market equilibrium price, leading to shortages.

Binding Price Floor

A government-imposed price control that sets a minimum price for a good or service above the equilibrium price, leading to excess supply.

Surplus

The excess of production or supply over demand, often leading to lower prices or wasted resources if not managed effectively.