The long-run average total cost curve is constructed from the
A. Lowest average total cost for producing each level of output.
B. Minimum points of the long-run marginal cost curves.
C. Minimum points of the short-run marginal cost curves.
D. Minimum points of the short-run average variable cost curves.
Answer: A
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If MB grows smaller and MC grows larger as the activity level grows, then:
A. an interior action for which MB = MC is the best choice. B. net benefit can be increased by increasing the action. C. net benefit can be increased by decreasing the action. D. there is no best choice.
In long-run equilibrium, both purely competitive and monopolistically competitive firms will:
A. produce at minimum average total cost. B. earn economic profits. C. achieve allocative efficiency. D. equate marginal cost and marginal revenue.
The existence of inflation does which of the following?
A) facilitates the downward adjustment of real wages B) reduces shoe-leather costs C) reduces tax distortions D) reduces the costs associated with money illusion
If marginal revenue is greater than marginal cost, the firm should
A. raise price. B. raise marginal revenue. C. decrease its rate of output. D. increase its rate of output.