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QUESTION 1 Which of the following statements is true? Economic

  1. Which of the following statements is true?

    Economic profit equals accounting profit minus implicit costs.

    All of the above.

    A fixed input is any resource for which the quantity cannot change during the period under consideration.

    The short run is any period of time in which there is at least one fixed input.

    In the long run there are no fixed costs.

2 points   

  1. Which of the following statements is true?

    When marginal cost is below average cost, average cost rises; when marginal cost is above average cost, average cost falls.

    The law of diminishing returns states that beyond some point the marginal product of a variable resource continues to rise.

    The marginal product is the change in total output by adding one additional unit of a fixed input.

    When marginal productivity of a variable input is falling then marginal costs of production must be rising.

    Fixed costs are costs which vary with the output level.

2 points   

  1. Which of the following statements is false?

    AFC = TFC/Q.

    TC = TFC + TVC.

    AVC = ATC - AFC.

    ATC = TC/Q.

    MC equals the change in ATC divided by the change in Q.

2 points   

  1. If a firm enlarges its factory size and realizes higher average (per unit) costs of production then:

    it has experienced constant returns to scale.

    it has experienced diseconomies of scale.

    the long-run average cost curve slopes downward.

    the long-run average cost curve shifts upward.

    it has experienced economies of scale.


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