Chapter 34.2

Question 1

Long Run Average Cost Curve

Answer 1

Curve that shows the least costly combination of any output.

Question 2

LRAC has usually a flatter U-shape when compared to

Answer 2

the SRAC curves as a result of economies/diseconomies of scale in the firm/industry

Question 3

Internal Economies of Scale

Answer 3

Benefits resulting from the firm’s internal decision to produce on a larger scale.

Question 4

External Economies of Scale

Answer 4

Benefits resulting from an increase in the scale of production of the industry in which the firm is operating.

Question 5

Economies of Scale

Answer 5

When costs per unit of output falls as scale of production increases.

Question 6

Diseconomies of Scale

Answer 6

When costs per unit increases as the scale of output increases.