Free Printable Behaviour of costs in the long run SSK

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Behaviour of costs in the long run SSK

Total questions: 20

Worksheet time: 17mins

Name

Class

Date

TRUE or FALSE?

The short-run average TOTAL cost can never be less than the long-run average total cost.

TRUE

FALSE

Which of the following must be true if a firm is experiencing economies of scale?

All costs are explicit.

Economic profits decrease as the firm’s output increases.

Long-run average total cost remains constant as the firm’s output decreases.

Long-run average total cost decreases as the firm’s output increases.

Which of the following must be true of the long run?

It is at least one year in duration.

At least one factor of production is fixed.

All factors of production are variable.

Average total costs are constant.

If the output of a firm doubles when the firm doubles all of its inputs, the firm must be experiencing:

economies of scale

constant returns to scale

decreasing returns to scale

increasing returns to scale

TRUE or FALSE?
The short-run average total cost curve declines and then increases as inputs increase because of economies & diseconomies of scale.

TRUE

FALSE

Which one of the following would most likely be caused by a firm growing too large and experiencing difficulties in communication and coordination?

Economies of scale

Constant returns to scale

Increasing returns to scale

Decreasing returns to scale

A farmer grows wheat using two inputs: labor and land whose prices are constant. If she doubles her inputs, she finds that the quantity of wheat produced more than doubles. Therefore, it must be true that in this output range her long-run average total cost curve is

Upward sloping

Downward sloping

Horizontal

U-shaped

If a firm’s production process exhibits economies of scale, which of the following will occur when the firm’s output increases?

Its short-run average total costs will rise.

Its short-run total costs will fall.

Its long-run average total costs will fall.

Its long-run total costs will fall.

Economies of scale occur when

long-run average total costs rise as output increases.

long-run average total costs fall as output increases.

average fixed costs are falling.

average fixed costs are constant.

10.

A student might describe information about the costs of production as

dry and technical.

boring.

crucial to understanding firms and market structures.

All of the above could be correct.

11.

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

12.

The property whereby long-run average total cost stays the same as the quanity of output changes.

Constant Returns to Scale

Economies of Scale

Efficient Scale

Diseconomies of Scale

13.

"Economies of Scale" is the phase of increasing long run average total costs

True

False

14.

Which one of the following would most likely be caused by a firm growing too large and experiencing difficulties in communication and coordination?

Economies of scale

Constant returns to scale

Increasing returns to scale

Decreasing returns to scale

15.

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

16.

The U shape of the long run average total cost (LRATC) curve has nothing to do with diminishing returns

True - diminishing returns are a feature of only short-run production and costs

False - diminishing returns causes economies of scale

17.

While in the SR firms operate on _____ AC curve, in the LR, they can choose to operate on ____ AC curve.

any; a single

a single; any

the lowest; the highest

the highest; the lowest

18.

The left-hand portion of the long-run average cost curve, where it is downward- sloping exhibits the case of _____, while he right-hand portion shows ______.

diseconomies of scale; economies of scale

economies of scale; diseconomies of scale

decreasing returns; increasing returns

increasing returns; diminishing returns

19.

All of the following are features of Long Run Average Cost Curve EXCEPT:

It is an ‘envelope curve’.

It is is tangential to the minimum cost point in only the optimum scale SAC.

It is a ‘planning curve’.

It is inverse ‘U-shaped’

20.

The learning curve was first described by psychologist _____ in 1885.

Sigmund Freud

William James

Hermann Ebbinghaus

Carl Jung

100 %

Behaviour of costs in the long run SSK

Total questions: 20

Worksheet time: 17mins

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