Note AcademyNote Academy
Start

Economics (AS & A Level) · May / June 2021 · Paper 32 · Question 8

9708Types of cost, revenue and profit, short-run and long-run production

The diagram shows the long-run average cost (LRAC) curve for a firm, and three short-run average cost (SRAC) curves. Which statement is correct?

  1. AWhen the minimum point of SRAC3 is lower than the minimum point of SRAC2 it reflects the law of variable proportions.
  2. BThe law of diminishing returns explains why each of the SRAC curves is U-shaped.
  3. CThe position of SRAC2 shows the minimum efficient scale of production.
  4. DThe rising section of SRAC1 indicates the existence of diseconomies of scale.

As printed in the paper

Show the answer

Correct answer: B. The law of diminishing returns explains why each of the SRAC curves is U-shaped.

Sit this whole paper →More on Types of cost, revenue and profit, short-run and long-run production

Make a free account to save your answers and see your weak topics and ask the AI why a wrong answer is wrong.