Long Run Costs And Output

Question 1

Breaking even

Answer 1

Situation in which a firm is earning exactly a normal rate of return. (Normal being government bond level)

Question 2

Shut-down point

Answer 2

The lowest point on the average variable cost curve. When price falls below this point, total revenue is insufficient to cover costs and will result in shut down

Question 3

Short-run industry supply curve

Answer 3

The sum of the marginal cost curves (above AVC) of all the firms in an industry

Question 4

Economies of scale vs diseconomies of scale

Answer 4

Do the costs of production increase per unit produced or decrease per unit produced if the scale increases

Question 5

Sources of economies of scale

Answer 5

Technological, bargaining power, save in transport costs…