The Figure Given Below Shows Three Short Run Average Total

question 62

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

-The long run is referred to as a planning horizon because:

• A)the firm has committed to a fixed quantity of at least one resource and the other resources are variable.
• B)the manager has selected the size of the firm that appears to be the least profitable and does not have the option of selecting any other plant size.
• C)the firm has not committed to a fixed quantity of any resource and has all options available to it.
• D)the manager has selected a scale of production.
• E)the firm is operating along a specific average-cost curve.

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Definitions:

Diseconomies of Scale

The phenomenon where, beyond a certain point, the cost per unit increases as a company continues to grow in size and output.

Per-Unit Cost

The average cost for each product produced, calculated by dividing the total production costs by the total units produced.

Output

The total quantity of goods or services produced by a firm, sector, or economy within a certain period of time.

Explicit Costs

Payments by a firm to purchase the services of productive resources.