ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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will rise if there are diminishing returns
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will fall if there are diminishing returns
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will rise if economies of scale are incurred
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is based on the assumption that all resources are variable
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Detailed explanation-1: -The long-run average cost curve shows the lowest total cost to produce a given level of output in the long run.
Detailed explanation-2: -A U-shaped long-run average cost curve is based on the assumptions that: (A) Greater division of labour and specialisation accure to larger firms. (B) Minimum cost of production at various levels of output. (C) Economies of scale prevail at small levels of output.
Detailed explanation-3: -Thus, the long-run average cost (LRAC) curve is actually based on a group of short-run average cost (SRAC) curves, each of which represents one specific level of fixed costs. More precisely, the long-run average cost curve will be the least expensive average cost curve for any level of output.
Detailed explanation-4: -in the long run, all resources are variable; in the short run, at least one resource is fixed.