A Horizontal Demand Curve Implies

question 120

Multiple Choice

A horizontal demand curve implies:

• A)a perfectly inelastic demand.
• B)demand will drop to zero if the price changes by any amount.
• C)price elasticity is equal to one.
• D)people will not respond to any change in price.

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Definitions:

Diseconomies of Scale

The situation in which the cost of producing each individual unit rises when a company's production volume grows, often resulting from inefficiencies and a rise in complexity.

Long-run Average Total Cost

The cost per unit of output in which all inputs, including capital, are variable, showing economies and diseconomies of scale over time.

Increasing Returns to Scale

A situation in which a proportional increase in all inputs results in a more than proportional increase in output, demonstrating economies of scale.