7c - Costs of Production Quick Quiz LONG RUN COSTS 7c 1...

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Costs of Production – Quick Quiz 7c LONG RUN COSTS 1. Economies and diseconomies of scale explain: 1. the profit-maximizing level of production. 2. why the firm's long-run average total cost curve is U-shaped. 3. why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point. 4. the distinction between fixed and variable costs. 2. In the long run: 1. all costs are variable costs. 2. all costs are fixed costs. 3. variable costs equal fixed costs. 4. fixed costs are greater than variable costs. 3. The above diagram shows the short-run average total cost curves for five different plant sizes of a firm. The shape of each individual curve reflects: 1. increasing returns, followed by diminishing returns. 2. economies of scale, followed by diseconomies of scale. 3. constant costs. 4. increasing costs, followed by decreasing costs. 4. As the firm in the above diagram expands from plant size #1 to plant size #3, it experiences: 1. diminishing returns.
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