Relationship between SAC and LRAC

Q. Explain the shapes of the total fixed cost curve and the average fixed cost curve. Give one reason for each, to justify the shape of the two curves.

Q. The positively sloped part of long run cost curve of a firm is due to ___________.

1. economies of scale
2. diseconomies of scale
3. diminishing returns to scale
4. marginal utility theory

Q. An economy is in equilibrium. From the following data, calculate investment expenditure:
Marginal Propensity to Consume = 0.9
Autonomous Consumption = 200
Level of Income = 10, 000
(Investment Expenditure = 800)

Q. The short run average cost curve (SAC) is __________.

1. L-shaped
2. U-shaped
3. C-shaped
4. T-shaped

Q. Marginal cost curve falls as output increases in the beginning. It starts rising after a certain level of output. This happens because of the influence of the ___________.

1. law of diminishing marginal rate of substitution
2. law of demand
3. law of supply
4. law of variable proportions

Q. All of the following are U-shaped curves, except _____________.

1. AVC curve
2. AFC curve
3. MC curve
4. AC curve