Long Run And Average Cost Flashcards
(26 cards)
What is the definition of long run in economics?
The long run is a period in which all factors of production and costs are variable.
True or False: In the long run, firms can adjust all inputs.
True
What is average cost?
Average cost is the total cost divided by the number of units produced.
Fill in the blank: Average cost is calculated as ________.
Total cost divided by quantity produced
What does the long run average cost curve represent?
It represents the lowest possible average cost of production at each output level when all inputs are variable.
Multiple Choice: Which of the following is NOT a characteristic of the long run?
Fixed inputs
What happens to the average cost as production increases in the long run?
It can decrease due to economies of scale.
True or False: The long run average cost curve is typically U-shaped.
True
What is the difference between short run and long run costs?
In the short run, at least one input is fixed; in the long run, all inputs are variable.
Fill in the blank: ________ occurs when increasing production leads to a decrease in average cost.
Economies of scale
Multiple Choice: Which of the following can lead to diseconomies of scale?
Overutilization of resources
What are fixed costs?
Costs that do not change with the level of output.
True or False: Average cost can never be greater than marginal cost.
False
What is marginal cost?
The cost of producing one additional unit of output.
Fill in the blank: In the long run, firms aim to minimize their ________.
Average costs
Multiple Choice: Which of the following factors can influence long run average costs?
Technology advancements
What is the significance of the minimum efficient scale?
It is the lowest output level at which long run average costs are minimized.
True or False: Long run average costs are constant as output increases.
False
What does the term ‘returns to scale’ refer to?
The rate at which output increases as inputs are increased proportionately.
Fill in the blank: ________ occurs when output increases at a greater rate than inputs.
Increasing returns to scale
Multiple Choice: Which scenario represents constant returns to scale?
Doubling inputs leads to a doubling of output.
What is the long run cost function?
A mathematical representation of how costs change with different levels of output when all inputs are variable.
True or False: Average cost is always decreasing in the long run.
False
What is a long run adjustment?
Changing all inputs of production in response to changes in market conditions.
