1. Draw a correctly labeled graph showing a long-run average cost curve. Label the sections showing economies of scale, diseconomies of scale and constant returns to scale. Explain economies of scale, constant returns to scale, and diseconomies of scale.

2. In the long run:

a. All inputs can be varied.

b. No inputs can be varied.

c. Only variable inputs can be varied.

d. Only fixed inputs can be varied.

e. A limited number of inputs can be varied.

3. Sunk costs:

a. Are costs that can be recovered when production is halted.

b. Are costs that should be not ignored in future decisions.

c. Are costs that should be ignored in future decisions.

d. Are incurred in the short run only.

e. Are costs of production that reoccur.

4. If the LRATC is falling the firm is experiencing:

a. decreasing AVC.

b. constant returns to scale.

c. economies of scale.

d. diseconomies of scale.

e. cost minimization.

5. If the LRATC is rising the firm is experiencing:

a. increasing AVC.

b. constant returns to scale.

c. economies of scale.

d. diseconomies of scale.

e. cost maximization.