Production Costs & Returns to Scale

If a firm doubles its use of inputs and finds that output increases by 50%, then it has experienced

• Growth
• Economies of scale
• Diseconomies of scale
• Evolution

The output range in region "c" is associated with......

• Economies of Scale
• Internal economies of Scale
• Internal diseconomies of Scale
• Diseconomies of Scale

The main difference between the SR and the LR is that 

• the law of diminishing returns applies in the LR
• all resources are variable in the LR
• fixed costs are more important to decision making in the LR
• in the SR all resources are fixed 

Which cost curves are represented by curves 1, 2, 3 and 4 (in that order)?

• ATC, MC, AFC, AVC

• MC, ATC, AVC, AFC

• AFC, MC, AVC, ATC

• ATC, AVC, AFC, MC

When MP reaches the point of diminishing returns, MC is

• also at its highest point
• intersects AVC
• intersects ATC
• is at its lowest point

As the firm in the above diagram expands from plant size 1 to 3 in the LONG RUN, it experiences...

• diminishing returns
• economies of scale
• diseconomies of scale
• constant costs 

When diseconomies of scale occur: 

• the long-run ATC curve falls
• MC intersects ATC
• the long-run ATC curve rises
• average fixed costs will rise 

The long-run ATC curve: 

• will rise if there are diminishing returns
• will fall if there are diminishing returns 
• will rise if economies of scale are incurred
• is based on the assumption that all resources are variable

Diseconomies of scale arise primarily because: 

• the SR ATC rises when MC increases
• of difficulties in managing a large business
• firms must be large relative to the market to employ efficient production techniques
• MP declines as more units of a variable input are added to a fixed input

A cost that cannot be partly or fully recovered through any subsequent action is known as a

• opportunity cost 
• fixed cost
• external cost
• sunk cost