The Long-Run Expansion Path for a Firm

question 59

Multiple Choice

The long-run expansion path for a firm:

• A)is not necessarily linear,but always slopes upward.
• B)may be backward-bending,if a firm uses less of one input as output increases.
• C)may be backward-bending,if the firm uses more of both inputs as output increases.
• D)is always linear,but not necessarily upward-sloping.

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Definitions:

Diseconomies of Scale

The phenomenon where an increase in production leads to higher costs per unit due to inefficiencies that arise from scaling up operations.

Increasing Returns

An increase in a firm’s output by a larger percentage than the percentage increase in its inputs.

Diminishing Returns

A principle stating that after a certain point, additional investment or effort yields progressively smaller increases in output.

Marginal-cost Curve

The marginal-cost curve represents how the cost of producing one additional unit of a good changes as its production volume varies.