In the Long Run, When Marginal Cost Is Above Average

question 418

Multiple Choice

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

• A)economies of scale.
• B)diseconomies of scale.
• C)constant returns to scale.
• D)efficient scale.

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Definitions:

Upsloping Line

In a graph, a line that rises from left to right, illustrating a positive relationship between two variables.

Interest-Rate Cost-Of-Funds Curve

As it relates to research and development (R&D), a curve showing the interest rate a firm must pay to obtain any particular amount of funds to finance R&D.

Expected-Rate-Of-Return Curve

As it relates to research and development (R&D), a curve showing the anticipated gain in profit, as a percentage of R&D expenditure, from an additional dollar spent on R&D.