Theme 3

The short run in economics occurs when.....

• there is at least one variable factor

• there is at least one fixed factor

• all factors are variable

• all factors are fixed

Which of the following explains the shape of the MC/AC/AVC curves in the short run?

• economies of scale

• diseconomies of scale

• law of DMR

• Law of demand

When total revenue is maximised marginal revenue is equal to...

• marginal cost

• zero

• price

• average cost

profit maximisation occurs where

• MR=MC

• Min AC

• AC=MC

• P=MC

The AVC curve gets closer to the AC curve because...

• AFC rises

• AFC stays constant

• AFC falls

• AVC rises

The shutdown point in the SR is where....

• AR=AVC

• AR=AC

• TR=TC

• MC=P

A fall in variable costs will lead to......

• an increase in profits and a fall in price

• a fall in price and a fall in profits

• an increase in profits and a fall in quantity

• a fall in profits and an increase in price

An increase in fixed costs shifts the.....

• AC curve only

• AC and MC curve

• MC curve only

• AVC only

A fixed cost can be defined as a cost that

• varies with output

• does not vary with output

• stays the same

• continuously falls

Economies of scale occurs when

• LRAC falls as output rises

• LRAC rises as output rises

• LRAC falls as output falls

• LRAC rises as output falls