Cost £ AC Quantity per week Q Figure 3 Short run average cost curve for a firm Figure 3 shows the short run average cost curve of a firm. Which one of the following options is not true? Select one: O At output greater than Q, the firm has diminishing returns to variable factors O Average cost is greater than its minimum value when output is Q As output increases average fixed cost increases Average cost = average fixed cost + average variable cost

Cost £ AC Quantity per week Q Figure 3 Short run average cost curve for a firm Figure 3 shows the short run average cost curve of a firm. Which one of the following options is not true? Select one: O At output greater than Q, the firm has diminishing returns to variable factors O Average cost is greater than its minimum value when output is Q As output increases average fixed cost increases Average cost = average fixed cost + average variable cost

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 4CQQ

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Similar questions

Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?
What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
What shape of a long-run average cost curve illustrates economies of scale, constant returns to scale, and diseconomies of scale?
Which costs are measured on per-unit basis: fixed costs, average cost, avenge variable cost, variable costs, and marginal cost?
What is the difference between economies of scale, constant returns to scale, and diseconomies of scale?
Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?
Are fixed costs also sunk costs? Explain.
What shapes would you generally expect each of the following cost curves to have: fixed costs, variable costs, marginal costs, average total costs, and average variable costs?
A common name for fixed cost is overhead. If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is 1,000. What does the average fixed cost curve look like? Use your response to explain what spreading the overhead means.
Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?