Explain why the long-run average cost is typically U shaped.
What will be an ideal response?
As firms grow, they can take advantage of mass production economies. However, as firms grow, they become more difficult to manage. This eventually causes an upturn in average cost, even if there continue to be mass-production economies. Note that the long-run shape has nothing to do with diminishing returns, which is a short-run phenomenon.
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The law of diminishing marginal returns describes changes in output when inputs change
Indicate whether the statement is true or false
Large company-paid employee benefits packages can alter behavior and result in
A. output enhancement. B. compensating differentials. C. shirking. D. seniority-based promotion.
The non- free trade policy of the United States that affects many poor countries of the world the most is the
A. tariff on imported tires. B. the proposed tariff on steel. C. agricultural subsidies. D. quota on wood products.
The minimum point on the marginal cost curve corresponds to the:
A. maximum point on the total cost curve. B. minimum point on the total cost curve. C. inflection point on the total variable cost curve. D. midpoint of the total cost curve.