Question : 14.4   Long-Run Cost 1) Which of the following statements true? A) In : 1241166

14.4   Long-Run Cost

1) Which of the following statements is true?

A) In the long run, the average cost curve is always downward sloping.

B) In the long run, the quantities of all inputs are fixed.

C) In the long run, the firm’s fixed costs are greater than its variable costs.

D) In the long run, all costs are variable costs.

E) In the long run, the total variable cost equals the total fixed cost.

2) Which of the following is FALSE?

A) Long-run average variable costs equal long-run average total costs.

B) Fixed costs increase in the long run.

C) As a firm produces more output, eventually it experiences diseconomies of scale.

D) In the long run, both the amount of capital and labor used by the firm can be changed.

E) In the long run, the firm has no fixed inputs.

3) In the long run,

A) all inputs can be varied.

B) all inputs are fixed.

C) some inputs are variable and other inputs are fixed.

D) output is fixed.

E) total variable cost cannot be changed.

4) Which of the following is true in the long run?

A) Total cost equals fixed cost.

B) Total cost is constant.

C) All costs are variable.

D) Marginal cost equals zero.

E) None of the above is true in the long run.

5) When a firm’s long-run average total cost falls as its output increases, the firm is experiencing

A) economies of scale.

B) diseconomies of scale.

C) constant returns to scale.

D) decreasing marginal returns.

E) decreasing cost of marginal returns.

6) As output increases, economies of scale occur when the

A) long-run average cost increases.

B) long-run average cost decreases.

C) short-run average total cost decreases.

D) long-run average cost stays constant.

E) long-run fixed cost decreases.

7) If a firm increases its output and its average cost decreases, the firm is experiencing which of the following?

A) increasing marginal returns

B) diseconomies of scale

C) economies of scale

D) random luck

E) decreasing cost of marginal returns

8) The main source of economies of scale is

A) reductions in the price of factors of production.

B) greater specialization of both labor and capital.

C) increasing average costs.

D) decreasing marginal product.

E) the ability to hire less labor.

9) The main sources of economies of scale are

A) increasing marginal cost and decreasing marginal product.

B) specialization of resources such as labor and capital.

C) caused by the difficulty of coordinating and controlling large enterprises.

D) decreasing marginal cost and increasing marginal product.

E) an increase in a firm’s bargaining power to lower the wage rate and the cost of capital as the firm’s output increases.

10) Economies of scale can occur as a result of which of the following?

A) increasing marginal returns as the firm increases its size

B) lower fixed cost as the firm increases its size

C) management difficulties as the firm increases its size

D) greater specialization of labor and capital as the firm increases its size

E) increased total cost when the firm increases its size