Question

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.

Answer 1

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.