Managerial Economics 4

The long run is a period of time in which

• the firm is able to maximise total profit

• the firm may want to build a bigger plant, but cannot do so

• the quantities of all inputs can be varied.

• economic efficiency is achieved

Which one of the following statements is false?

• Marginal cost depends on the amount of labour hired.

• Total cost equals total fixed cost plus total average cost.

• Marginal cost is the increase in total cost resulting from a unit increase in output

• Average total cost is total cost per unit of output.

If an input is owned and used by a firm, then its

• explicit cost is zero.

• implicit cost is zero.

• opportunity cost is zero.

• economic cost is zero.

The short run is a time period in which:

• all resources are fixed.

• the level of output is fixed.

• the size of the production plant is variable

• some resources are fixed and others are variable.

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output is:

• 200 units

• 400 units

• 800 units

• 1000 units