- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 5. Understanding Economies and Diseconomies of Scale
CFA Practice Question
The long-run average total costs of production curve ______
II. is explained by decreasing marginal productivity.
III. passes through the minimum point of each short-run average total cost curve.
IV. is considered to be an envelope curve because each short-run average total cost curve touches it at only one level of output.
I. rises as output increases when production experiences economies of scale.
II. is explained by decreasing marginal productivity.
III. passes through the minimum point of each short-run average total cost curve.
IV. is considered to be an envelope curve because each short-run average total cost curve touches it at only one level of output.
A. I, II and IV
B. III and IV
C. IV only
Explanation: Economies of scale cause the LRATC curve to decrease. Long-run costs are not related to marginal productivity. The curve is not tangent to the low points of all SRATC curves.
User Contributed Comments 2
| User | Comment |
|---|---|
| jenny | The third one is not correct: each short-run curve is tangent to the long-run curve, but does not mean the tangent point is the minimum point. Look at the graph and you will see. |
| DiscoAfro | That is correct. To precise; I, II and III are not correct. There for the answer is C: IV only. |