Match the items of the List – I with those of List – II and suggest the correct code : Codes : a b c dList – I List – II a. Constant average cost over a range of output i. Economic capacity b. Average cost becomes constant momentarily ii. Reserve capacity c. Normal average cost is a U-shaped curve iii. Production and Managerials costs effects d. Modern Long-run average cost is L-shaped iv. Economies and Diseconomies
ii i iv iii
a. When average cost stays constant over a range of output, the short-run cost curve has a flat bottom. Firms build plants with some reserve capacity so that output can be varied without a rise in cost. So a matches ii.
b. When average cost becomes constant only momentarily, the curve is U-shaped and touches its lowest point at a single output. That minimum-cost output is the economic (optimum) capacity of the plant. So b matches i.
c. The traditional long-run average cost curve is U-shaped because economies of scale lower cost at first and diseconomies of scale raise it beyond a point. So c matches iv.
d. In the modern theory, the long-run average cost curve is L-shaped: production costs keep falling with technical economies, while managerial costs rise only slowly at very large scales, so the total keeps falling or levels off. The printed "Production and Managerials costs effects" refers to this. So d matches iii.
The code is a–ii, b–i, c–iv, d–iii.
Hence, ii i iv iii.
Similar Questions
Match the items of List - I with those of the List - II and indicate the correct code :
List - I List - II (a) Excess capacity of the plant (i) Cost reduction with output expansion (b) Resorting to New Technology (ii) Constant cost with output expansion (c) Setting up of the Training Institutions (iii) Internal economies (d) Reserve capacity of the plant (iv) External economies Codes :
(a) (b) (c) (d)
Important Questions from Short-run and long-run cost curves
- L shaped average cost curve is witnessed in the large firms because
- The minimum Long Run Average Cost (LAC) can be determined on a
I. LAC curve for a normal production function
II. LAC curve for a linear production function
III. Planning curve
IV. Envelope curve
Codes: A multiproduct firm compares temporary shutdown with its best feasible operating product mix. Assume no shutdown/restart cost and unchanged unavoidable costs. Which pair of totals is sufficient for this comparison?
A. Past sunk investment
B. Last year’s revenue
C. Total revenue from the proposed operating mix
D. Total operating costs that would be avoided by shutting downMatch the items of List - I with those of the List - II and indicate the correct code :
List - I List - II (a) Excess capacity of the plant (i) Cost reduction with output expansion (b) Resorting to New Technology (ii) Constant cost with output expansion (c) Setting up of the Training Institutions (iii) Internal economies (d) Reserve capacity of the plant (iv) External economies Codes :
(a) (b) (c) (d)
