Consider the Short-Run and Long-Run Cost Curves for a Firm

question 47

Multiple Choice

Consider the short-run and long-run cost curves for a firm.If factor prices decrease,

• A)the firm will move down along both its long-run and short-run average cost curves.
• B)the firm will move down along its long-run average cost curve only.
• C)both the long-run and short-run average cost curves will shift downward.
• D)there will be a downward shift in the long-run average cost curve but not in the short-run average cost curve.
• E)there will be no change in the cost curves in the long run.

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Definitions:

Operating Activity

Activities directly related to the primary business operations of a company, including production, distribution, and sales of goods and services.

Payment Of Dividends

The distribution of a portion of a company's earnings to its shareholders, usually in the form of cash or additional shares.

Interest Expense

The expense that an entity has to bear for the money it borrows over a certain duration.

Preferred Stock

A type of stock that offers dividends at a fixed rate and has priority over common stock in the distribution of assets during a company's liquidation.