9. MC is given by a. the slope of the TFC curve b. the slope of the TVC curve bu
ID: 1226210 • Letter: 9
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9. MC is given by a. the slope of the TFC curve b. the slope of the TVC curve but not by the slope of the TC curve c. the slope of the TC curve but not by the slope of the TVC curve. d. the slope of the TC curve or the slope of the TVC curve. 10. Decreasing returns to scale imply that a. long-run average costs are constant. b. long-run average costs are falling c. long-run average costs are increasing. d. long-run average costs are negative e. none of the above. 11. Which of the following statements is false? a. The shape of the long-run average cost curve is an important determinant of the market structure of an industry in terms of the number of firms operating in the industry b. If the price of an input changes, there will be a new expansion path. c. As long as marginal cost is below average cost, average cost will be rising d. An improvement in production technology will lower the average costs of production e. If labor is a very important part of a firm's costs and input substitution is difficult, the production cost will rise when wage rates rise 12. Which one of the following statements is false? a. In the long run all production inputs are variable. b. Decreasing returns to scale prevail when output increases by a proportion that is smaller than the proportion by which all inputs increase c. When marginal cost equals average variable cost, average variable cost is at its minimum. d. Average fixed cost curve can have a U-shape. 13. Increasing returns to scale in production means a. more than twice as much of all inputs is required to double output. b. less than twice as much of all inputs is required to double output c. more than twice as much of only one input is required to double output. d. isoquants must be linear e. none of the above.Explanation / Answer
9. d. MC is given by slope of TC or TVC curve. TC is sum of fixed and variable cost. Marginal cost is change in total cost which is only due to change in variable cost.
10. c. Long run avergae costs are increasing when returns of scale are diminishing due to diseconomies of scale.
11. C. As long as MC is below AC, Ac is decreasing
12.d, average fixed cost curve can not be U shaped. AS fixed cost are same with increase in output and so AFC curve is downward sloping
13. B.
14. C.
15 B
16. A
17 A
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