Question

Question 12

The long-run average cost curve will be upward-sloping when the firm has:

	constant returns to scale.
	marginal returns to scale.
	economies of scale
	diseconomies of scale

Question 13

A production function that is characterized by increasing returns to scale cannot be affected by diminishing marginal product.

	True
	False

Question 14

A firm always operates at some point on its long-run average total cost curve in both the long run and the short run.

	True
	False

Question 15

In the short run, a firm is earning revenue equal to $15,000 per month, has fixed costs of $5,000 per month and needs to spend $17,000 a month for labor (the variable factor). This firm should shut down.

	True
	False

Answer 1

Q12.Answer is Diseconomies of scale
The diseconomies induces the cost curve to rise.
Q13. Answer is True.
The firm experiencing the Increasing returns to scale cannot have diminishing returns as they get returns at an increasing rate with the increase in factor.
Q14. Answer is True.
The long-run average cost is an envelope of various short-run average cost curve.
Q15. Answer is True.
As the firm is not able to recover its variable cost even.