The Figure Below Shows a Family of Cost Curves for a Firm.The

question 35

Multiple Choice

The figure below shows a family of cost curves for a firm.The subscripts 1,2,and 3 for the SRATC curves refer to different plant sizes. FIGURE 8-3
-Refer to Figure 8-3.If this firm is producing at point B,then

• A)this firm is producing a level of output that is technically inefficient in the long run.
• B)this firm is experiencing decreasing returns to scale.
• C)this firm could produce the same level of output at a lower cost with plant size 2.
• D)it should employ more of its variable factors of production.
• E)plant size 1 is optimal.

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Definitions:

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, a measure of the risk of making a Type I error.

Alternative Hypothesis

The hypothesis that there is a significant difference or effect, contrasting with the null hypothesis and indicating the presence of an observed effect.

Type II Error

A statistical mistake where a false null hypothesis is not rejected, meaning the test fails to observe a difference when in truth there is one.

Population Mean

The average value of a characteristic in a population, calculated by summing all the values and dividing by the number of values.