CFA Practice Question

There are 891 practice questions for this topic.

CFA Practice Question

A firm's short-run cost curves will shift upward if there is a ______.
A. technological improvement or an increase in the price of a productive resource
B. technological improvement or a decrease in the price of a productive resource
C. downward shift in total product or an increase in the price of a productive resource

User Contributed Comments 6

User Comment
DannyZhou I got this one right by guessing. What does " downward shift in total product" have to do with the short-run cost curve?
JepTang Meaning that for every decline in the total product produced by a given amount of input (both labor and capital) then the cost per product increases. Why? Because the cost of production will be spread out (divided) over a smaller amount of output. In arithmetic terms, your divisor (products) decreased while, either, keeping your numerator constant or higher.
jpducros Why does answer 1 is not correct ? Normally technological improvement has a cost.
Dannyl Technological improvement does have a cost, resulting in the use of more capital (fixed cost) and less labour(variable cost). An increase in the fixed factor and a decrease in the variable factor may increase total costs at low output levels. At high output levels, average total costs generally decrease.
hoyleng thanks dannyl..
nostalgia the answer is a little odd though, as it mentions a "shift" of the curve, and not a movement along the curve. I believe only changes in technology and the prices of resources can produce shifts in the short run cost curve..
You need to log in first to add your comment.