As output expands, LAC curve falls. This is due to:
Economies of scale
Economies of scale mean that long-run average cost falls as the scale of production expands. Diseconomies of scale make it rise. The law of variable proportions concerns changing a variable input while other inputs remain fixed, so it is a short-run concept.
Important Questions from Theory of cost - Teaching
Which of the following are the methods of determining cost behaviour?
a) High and low point method
b) Least square regression method
c) Accounting or analytical approach
d) Non - parametric method
Choose the correct answer from the options given below
A U - shaped long-run average cost curve is based on the assumptions that
A. Economies of scale prevails at small levels of output
B. Diseconomies of scale prevails at larger levels of output
C. Benefits of the division of labour and specialisation accrue more at the lower scale of production
D. Managerial inefficiencies are prone to a higher scale of operations
Choose the correct answer from the options given below:
Given the total revenue function, TR = 1400Q − 6Q 2 and the total cost function, TC = 1500 + 80 Q at Q = 100 units (where Q is the amount of output), which one of the following is correct?
A. MR > MC
B. MC = 80
C. MR < MC
D. MR = MC
Given \(TC=Q^3-10Q^2+60Q\) for \(Q>0\), what is the minimum average cost and at what output does this minimum average cost occur?
