Question
In: Economics
3. Short-run costs are generally lower than long-run costs.
True/False Questions.
3. Short-run costs are generally lower than long-run costs.
4. If a firm has zero fixed costs, then the firm’s total cost is equal to its variable costs.
5. Since the marginal cost curve “pulls” the average variable cost curve, the marginal cost curve will lie above the average variable cost curve only when average variable costs are decreasing.
Solutions
Expert Solution
3 - False
The long run costs are generally lower because the firms enjoy the benefits of large scale production and hence the cost reduce in long run. Also better adaptation in long run helps to minimize costs.
4 - True
Since Total cost = TFC + TVC
If TFC will be 0 then TC = TVC
5 - True
Until the average costs are rising the marginal cost will be lower than AC curve unless the AC starts falling.
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considering expanding production to two or even three factories.
The following table shows the company’s short-run average total
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one, two, or three factories. (Note: Q equals the total quantity of
bikes produced by all factories.)
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company produces bikes using only one factory. However, it is
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