1. MC is given by

a. the slope of the TFC curve.

b. the slope of the TVC curve but not by the slope of the TC curve.

c. the slope of the TC curve but not by the slope of the TVC curve.

d. the slope of the TC curve or the slope of the TVC curve.

2. Decreasing returns to scale imply that

a. long-run average costs are constant.

b. long-run average costs are falling.

c. long-run average costs are increasing.

d. long-run average costs are negative

3. When average cost is falling, marginal cost is ____________ and when average cost is rising, marginal cost is _________________.

a. falling, above average cost

b. above average cost, below average cost

c. below average cost, above average cost

d. both a and c

4. Which of the following statements is false?

a. The shape of the long-run average cost curve is an important determinant of the market structure of an industry in terms of the number of firms operating in the industry.

b. If the price of an input changes, there will be a new expansion path.

c. As long as marginal cost is below average cost, average cost will be rising.

d. An improvement in production technology will lower the average costs of production.

e. If labor is a very important part of a firm’s costs and input substitution is difficult, the production cost will rise when wage rates rise