Long Run Costs

Wolfsburg Wagon is a small automaker. Wolfsburg's long run average total cost is shown in the table. For what levels of output does the firm experience increasing returns to scale?

• 1-4

• 4-6

• 6-8

• 1-8

The short-run average TOTAL cost can never be less than the long-run average total cost.

• TRUE

• FALSE

The short-run average VARIABLE cost can never be less than the long-run average total cost.

• TRUE

• FALSE

What is the definition of long run costs in economics?

• Costs that vary with output in the long run

• Costs that remain fixed regardless of output

• Costs that are only incurred in the short run

• Costs that are irrelevant to production

Which of the following is a characteristic of long run costs?

• All inputs are variable

• Some inputs are fixed

• Only labor costs are considered

• Only capital costs are considered

In the long run, firms can adjust which of the following?

• All factors of production

• Only labor

• Only capital

• Only technology

What is the relationship between long run costs and economies of scale?

• Long run costs decrease as output increases due to economies of scale

• Long run costs increase as output increases due to economies of scale

• Long run costs remain constant regardless of economies of scale

• Long run costs are not affected by economies of scale

Which curve represents long run costs in economics?

• Long Run Average Cost Curve

• Short Run Average Cost Curve

• Marginal Cost Curve

• Total Cost Curve

What happens to long run costs when a firm experiences diseconomies of scale?

• Long run costs increase

• Long run costs decrease

• Long run costs remain constant

• Long run costs become zero

How do technological advancements affect long run costs?

• They typically reduce long run costs

• They typically increase long run costs

• They have no effect on long run costs

• They make long run costs unpredictable