In the short run, if we want to increase output we need to use more variable inputs, such as workers, with a given amount of fixed inputs, such as machinery. Eventually, what can we expect about our production costs as output levels continue to rise?

A)Marginal cost will begin to fall

B)Average variable cost will begin to rise

C)Average fixed cost will remain constant

D)Average total cost will begin to fall

Suppose that a firm increases its production level from 40 to 45 units and its long run average total cost increases from $800 to $850. If the price of inputs and technology remain constant, which of the following statements is CORRECT?

A)In this range of output levels, constant returns to scale is present

B)In this range of output levels, increasing returns to scale is present

C)In this range of output levels, decreasing returns to scale is present

D)In this range of output, the long run marginal cost curve intersects the long run average total cost curve

If the price elasticity of demand for lamps is -1.5, what is the change in quantity demanded as a result of a 20% price cut?

A)45%

B)30%

C)40%

D)25%