Short-run is defined as a period in which
A All factors are fixed
B All factors are variable
C Some factors are fixed
D Output is constant
In the short run, at least one factor of production remains fixed while others are variable.
Long-run cost curves differ from short-run cost curves because in the long run
A Fixed costs exist
B Variable costs disappear
C All factors become variable
D Technology remains unchanged
In the long run, firms can adjust all factors of production.
Long-run average cost (LAC) curve is also known as
A Planning curve
B Envelope curve
C Marginal curve
D Iso-cost curve
LAC envelopes various short-run average cost curves.
The LAC curve is derived from
A AVC curves
B MC curves
C SAC curves
D AFC curves
LAC is formed by the locus of minimum points of SAC curves.
The shape of the LAC curve is generally
A U-shaped
B Vertical
C Horizontal
D Inverted U
Initially economies of scale lower costs, then diseconomies raise costs.
The downward sloping part of the LAC curve represents
A Diseconomies of scale
B Increasing marginal cost
C Economies of scale
D Fixed costs
Economies of scale reduce average cost as output expands.
The upward sloping part of the LAC curve reflects
A Economies of scale
B Constant returns
C Diseconomies of scale
D Law of demand
Managerial and coordination problems increase costs at large scale.
Minimum point of LAC curve indicates
A Break-even output
B Optimum scale of production
C Maximum profit
D Shut-down point
Optimum scale occurs where average cost is minimum.
Which of the following causes internal economies of scale?
A Industry expansion
B Better management
C Government subsidy
D Growth of market
Internal economies arise from firm’s own expansion and efficiency.
External economies of scale arise due to
A Firm-level expansion
B Industry-wide growth
C Cost cutting by firm
D Managerial efficiency
External economies benefit all firms in an industry.
Which is an example of technical economies of scale?
A Bulk purchase discount
B Improved machinery
C Cheaper finance
D Tax concession
Use of advanced machinery lowers per-unit cost.
Managerial economies result from
A Better division of labour
B Cheaper raw materials
C Improved supervision
D External assistance
Specialized management improves efficiency in large firms.
Financial economies of scale arise due to
A Skilled labour
B Better technology
C Access to cheaper credit
D Improved transport
Large firms can borrow at lower interest rates.
Diseconomies of scale occur mainly because of
A Improved technology
B Better coordination
C Management inefficiency
D Division of labour
Large size makes control and coordination difficult.
External diseconomies arise due to
A Firm inefficiency
B Industry congestion
C Poor management
D Rising productivity
Overcrowding of industry raises input prices.
When output increases proportionately with inputs, it indicates
A Increasing returns
B Decreasing returns
C Constant returns
D Negative returns
Constant returns to scale imply proportional change.
LAC curve initially falls due to
A Law of diminishing returns
B Internal economies
C Fixed costs
D Rising wages
Internal economies reduce cost per unit at initial expansion.
Which curve shows lowest possible cost for producing each output in long run?
A SAC
B AVC
C MC
D LAC
LAC represents minimum achievable average cost.
In the long run, fixed cost
A Increases
B Decreases
C Remains constant
D Becomes zero
All costs are variable in the long run.
Economies of scale are available up to
A Maximum output
B Shut-down point
C Optimum scale
D Break-even point
Beyond optimum scale, diseconomies begin.
Which cost curve touches LAC at minimum point?
A MC
B AVC
C SAC
D AFC
At optimum scale, a particular SAC is tangent to LAC.
Constant returns to scale are shown by
A Falling LAC
B Rising LAC
C Horizontal LAC
D Vertical LAC
Cost per unit remains constant.
External economies reduce cost because of
A Firm efficiency
B Industry infrastructure
C Managerial skills
D Output control
Better transport, power, and skilled labour lower costs.
Which is NOT an economy of scale?
A Technical economy
B Managerial economy
C Marketing economy
D Price discrimination
Price discrimination is a pricing policy, not an economy of scale.
Long-run cost analysis helps firms in
A Output pricing
B Capacity planning
C Demand estimation
D Revenue forecasting
LAC guides firms in choosing plant size.
Economies of scale mainly occur due to
A Fixed cost
B Specialization
C Diminishing returns
D Rising input prices
Specialization improves efficiency at larger scale.
Diseconomies of scale can be internal when caused by
A Rising wages in industry
B Poor internal management
C Transport congestion
D Power shortages
Internal diseconomies arise within the firm.
External diseconomies affect
A One firm only
B One industry only
C All firms in industry
D Consumers only
They arise due to industry-wide expansion.
Which cost curve helps determine optimum plant size?
A MC
B AVC
C LAC
D SAC
Minimum point of LAC indicates optimum scale.
The law underlying U-shaped LAC is
A Law of demand
B Returns to scale
C Law of supply
D Marginal utility
Increasing and decreasing returns shape the LAC.
Economies of scale reduce
A Fixed cost
B Variable cost
C Average cost
D Marginal cost
Economies lower cost per unit.
Diseconomies of scale increase
A Output
B Profit
C Average cost
D Efficiency
Costs rise due to inefficiencies.
Which factor limits economies of scale?
A Market size
B Technology
C Management
D All of the above
All these can restrict expansion benefits.
Long-run marginal cost curve
A Lies above LAC
B Lies below LAC
C Intersects LAC at minimum
D Is horizontal
LMC cuts LAC at its minimum point.
Cost minimization in long run implies
A Lowest AVC
B Lowest MC
C Lowest LAC
D Lowest AFC
Firms aim to minimize long-run average cost.
External economies are also known as
A Real economies
B Pecuniary economies
C Internal economies
D Managerial economies
External economies arise due to market price effects.
Which economy arises from bulk buying?
A Technical
B Managerial
C Marketing
D Financial
Bulk purchase lowers marketing and procurement cost.
Long-run cost curves assume
A Fixed technology
B Changing demand
C Perfect competition only
D Government control
Economies of scale are exhausted when
A MC = AC
B LAC stops falling
C AVC is minimum
D TC is maximum
Beyond this point, costs stop declining.
LAC curve slopes upward after optimum scale due to
A Rising demand
B Diseconomies
C Fixed cost
D Taxation
Diseconomies raise average cost.
Which curve reflects planning decisions of firm?
A SAC
B AVC
C MC
D LAC
LAC guides long-term planning.
Which cost curve is also called planning curve?
A SAC
B MC
C LAC
D AVC
Firms plan future output using LAC.
Economies of scale exist when
A Output doubles and cost less than doubles
B Cost doubles and output doubles
C Output doubles and cost more than doubles
D Cost remains constant
Per-unit cost falls with scale.
Which cost is irrelevant in long run?
A Variable cost
B Fixed cost
C Average cost
D Marginal cost
Fixed costs do not exist in long run.
Which curve is flatter than SAC curves?
A MC
B AVC
C LAC
D AFC
LAC reflects best cost conditions.
Economies of scale lead to
A Higher prices
B Lower cost
C Lower output
D Diseconomies
Scale benefits reduce per-unit cost.
Which cost concept links short run to long run?
A AVC
B MC
C SAC
D LAC
LAC connects optimal short-run plants.
Which industry benefits most from economies of scale?
A Cottage industry
B Large-scale manufacturing
C Agriculture
D Handicrafts
Large plants exploit technical and managerial economies.
The study of economies of scale belongs to
A Demand theory
B Cost theory
C Revenue theory
D Welfare theory
Economies affect cost behavior of firms.