Homework 7.4 Costs in the Long Run

A firm is facing constant returns to scale if its total cost of production does not change with increases in output produced.

False

Constant returns to scale occur when the long-run average cost of producing each individual unit increases as total output increases.

False

As output increases, a firm experiencing diseconomies of scale will see the long-run average cost (LRAC) curve ___________.

Increasing

The shape of the long-run average cost curve determines the number and size of firms competing in the industry.

True

Which of the following occurs when the long-run average cost of producing each individual unit increases as total output increases?

diseconomies of scale

Given that there are significant economies of scale involved in making flat screen television sets, the cost of manufacturing a flat screen television set most likely will ____________________.

fall as the industry matures

The long-run average cost (LRAC) curve is actually based on a group of ______________, each of which represents one specific level of fixed costs.

short-run average cost curves

Which description best fits the definition of diseconomies of scale?

the situation in which the long-run average cost of producing each individual unit increases as total output increases

When will a firm experience diseconomies of scale?

when LRAC increases as output increases

Which of the following explains a firm's output when the long-run average cost curve has a flat bottom?

firms are able to produce at a variety of output levels along the flat bottom of the curve.

Economies of scale occur when a firm's long-run average total cost curve is ___________________.

Downward sloping