A Firm's Long-Run Average Cost Curve

question 57

Multiple Choice

A firm's long-run average cost curve

• A)shows the minimum cost of producing each possible level of output with a fixed factor.
• B)shows the relationship between marginal cost and output given that the economically most efficient method of production is employed.
• C)is the boundary between attainable and unattainable cost levels,with known production technologies and given factor prices.
• D)is horizontal in most situations.
• E)is an envelope of short-run average variable cost curves.

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Definitions:

Hard Capital Rationing

Hard capital rationing involves a situation where a company cannot access additional funds for investments at any cost due to external factors, such as market conditions or regulatory limits.

Discounted Payback

A capital budgeting method that calculates the time it takes to recoup an investment's initial costs, taking the time value of money into account.

Time Value of Money

The concept that money available at the present time is worth more than the same amount in the future due to its earning capacity.

Project's Liquidity

The ease with which a project's assets can be converted into cash without significant loss of value.