1.Refer to Graph A. The difference between the SRATC curves and the LRAC curve i

Question

1.Refer to Graph A. The difference between the SRATC curves and the LRAC curve is that

A) the SRATC curves show the optimal plant size when all factors of production are variable, whereas the LRAC shows the lowest cost attainable associated with each LRAC curve.
B) the SRATC curves show the lowest attainable cost of production at each level of output when all factors are variable in the short run, whereas the LRAC curve shows the same in the long run.
C) for the SRATC curves, one or more of the factors of production is fixed, whereas for the LRAC curve, all factors of production are variable.
D) the SRATC curves show diseconomies of scales, whereas the LRAC curve shows economies of scale.

A) Q2 can be produced at a lower average cost with plant size 2 compared to plant size 1.
B) The firm will never produce output Q2 in the short run
C) Q2 is never efficient to produce unless output Q3 is unattainable
D) Q2 is on the part of the LRAC that exhibits diseconomies of scale
E) The cost of producing Q2 is higher in the long run compared to the short run

3.Look at Graph B. The long-run cost curve between points A and B illustrates

A) diseconomies of scale.
B) diminishing marginal product.
C) constant returns to scale.
D) economies of scale.

Explanation / Answer

C B D E

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