Asked by Jillian Hearne on Jun 09, 2024
Verified
A firm is producing output less than the output associated with the minimum point on the firm's short run average variable cost curve. At this level of output the firm uses its fixed capital input ________ and its variable labor input ________.
A) efficiently; efficiently
B) efficiently; inefficiently
C) inefficiently; efficiently
D) inefficiently; inefficiently
Average Variable Cost
The total variable costs (like materials and labor) divided by the quantity of output produced, indicating the cost of producing each unit.
Fixed Capital
Long-term assets used in the production of goods and services, such as buildings, machinery, and equipment.
Variable Labor
Labour costs that vary directly with the level of production or output in a business.
- Understand the relationship between various cost curves in the short run, including average variable cost (AVC), average total cost (ATC), and marginal cost (MC).
Verified Answer
EC
Emily CarricoJun 12, 2024
Final Answer :
D
Explanation :
Producing output less than the output at the minimum point on the short run average variable cost curve indicates inefficiency in the use of both fixed capital (since the firm is not achieving economies of scale) and variable labor (since the average variable cost is not minimized).
Learning Objectives
- Understand the relationship between various cost curves in the short run, including average variable cost (AVC), average total cost (ATC), and marginal cost (MC).