If a firm's short-run average cost curves are u-shaped, does this imply that the long-run average cost curve must also be u-shaped?

What will be an ideal response?


No. The short-run average cost curves are u-shaped because of gains from division of labor in the beginning and then diminishing returns due to the fixed scale of production in the short run. In the long run, the firm is able to change its scale of production so no diminishing returns occur. Thus, the shape of the long-run average cost curve depends on whether the firm faces increasing, constant, or decreasing returns to scale.

Economics

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A property tax payment made by the owner of an apartment building is a

A) cost irrelevant to rent-setting decisions because it is not affected by supply and demand. B) marginal cost of continuing to own the building. C) marginal cost of supplying rental space. D) marginal overhead cost and will therefore affect rental rates. E) sunk cost and therefore cannot affect rents even in the long run.

Economics

When measuring the actual output produced in an economy, one should focus on GDP measured in nominal terms

Indicate whether the statement is true or false

Economics

If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1,000 billion and cause inflation. If the marginal propensity to consume (MPC) is 0.80, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

a. government spending by $200 billion. b. taxes by $100 billion. c. taxes by $1,000 billion. d. government spending by $1,000 billion.

Economics

Which of the following is true of The Stigma of the Newcomer?

A. It is less common today than it was several generations ago. B. It is more relevant today because neighbors do not know each other well. C. It would be more likely to occur in New York City than in a rural community in Iowa. D. It relates to the introduction of new technology so none of the answers are correct.

Economics