The Figure Given Below Shows Three Short Run Average Total

question 103

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

-In the oil tanker industry, large companies have lower risk and are able to optimize vessel utilization. If consolidation allows companies to lower their long-run average total costs, this is an example of:

• A)the opportunity costs of mergers.
• B)the increase in utility of managers by being able to control larger companies.
• C)the dangers of oil tankers to the environment.
• D)the economies of scale in the oil tanker industry.
• E)the law of diminishing returns.

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Definitions:

Differentiated Products

Goods or services that are distinguished from similar products by characteristics like quality, design, and branding, which affect consumer choice.

Interdependence

A relationship among firms in which their decisions significantly affect one another’s profits; characteristic of oligopolies.

Oligopoly

A market structure characterized by a small number of firms that control a large portion of the market share, influencing prices and competition.

Barriers to Entry

These are obstacles that prevent new competitors from easily entering an industry or area of business.