The Figure Given Below Shows Three Short Run Average Total

question 24

Multiple Choice

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3

-If a firm experiences constant returns to scale throughout:

• A)the long-run average-total-cost curve is negatively sloped.
• B)the short-run average-total-cost curves are tangential to the long-run average-total-cost curve at a point on their positively sloped portion.
• C)the short-run average-total-cost curves are tangential to the long-run average-total-cost curve at their minimum points.
• D)the short-run average-total-cost curves are tangential to the long-run average-total-cost curve at a point on their negatively sloped portion.
• E)the long-run average-total-cost curve is positively sloped.

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Definitions:

Fair Value Adjustment

A process of adjusting the book value of an asset or liability to reflect its current market value.

Available-for-Sale

A category of securities that are not classified as held-to-maturity or trading securities, and are recorded at fair value.

Unrealized Loss

A loss that occurs on paper due to a decrease in the value of an investment, but has not been realized through a transaction.

Equity Method Investments

Accounting for investments in which the investor has significant influence over the investee, recognizing proportional earnings of the investee.