If the Generic Production Function Q=f(K,L) Displays Increasing Returns to Scale

question 20

Multiple Choice

If the generic production function Q=f(K,L) displays increasing returns to scale, the value of K is fixed in the short-run, and the prices of all inputs are held constant, then:

• A) the Short-Run Average Cost curve must be strictly decreasing.
• B) the Long-Run Average Cost curve must be strictly decreasing .
• C) the Short-Run and the Long-Run Average Cost curves will coincide.
• D) the Long-Run Average Cost curve must be strictly increasing .

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Definitions:

Continuous Improvement

An ongoing effort to improve products, services, or processes by making incremental improvements over time.

Bottlenecks

Points of congestion or obstruction in a system that significantly delay or impede its overall function or efficiency.

Customer Value

The understanding of a product or service's value to a customer compared to other available options.

Profitability

The ability of a business to earn a profit, reflected in the difference between its revenue and expenses.