Question 1

Explain how the long-run average cost curve is constructed graphically.

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Question 2

Why might firms experience diseconomies of scale?

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Question 3

"A firm cannot experience both economies of scale and diminishing marginal product." Do you agree or disagree? Why?

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Question 4

How is the long-run average cost curve found? What is its importance to the firm?

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Question 5

"The short-run average total cost curve and the long-run average cost curve are both U-shaped for the same reasons." Do you agree or disagree? Why?

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Question 6

"The long-run average cost curve is derived from adding all short-run average cost curves together." Do you agree or disagree? Explain.

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Question 7

What factors generate economies of scale?

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Question 8

For an industry in which average costs continue to decline as output rises, what would you expect the minimum efficient scale to be? Explain your answer.

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Question 9

What is minimum efficient scale? Why is it important?

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Question 10

"If an industry's minimum efficient scale is between 2,000 and 4,000 units of output, then a firm producing 2,000 units of output in that industry has a cost-saving advantage over another firm producing 4,000 units of output in the same industry." Do you agree or disagree? Explain.

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Question 11

The minimum efficient scale in the figure below shows that 
A) point A is the minimum efficient scale (MES) for the firm.
B) point B is the minimum efficient scale (MES) for the firm.
C) the long-run average cost curve (LAC) reaches a minimum point at B.
D) the minimum efficient scale (MES) illustrates maximum average costs.

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Quiz 22: The Firm: Cost and Output Determination