Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true.Spreading overhead is the process of dividing total fixed costs by more units of output, which implies that average fixed cost declines as quantity declines.Diminishing returns, or decreasing marginal product, imply diminishing marginal cost.At the output level where MR = MC, if the corresponding P is above AVC but below ATC, the loss-minimizing move is to shut down or stop production. A firm that is breaking even, or earning a zero level of profit, is one that is earning exactly a normal rate of return, which implies that new investors are not attracted, but current ones are not running away either.Zero economic profit implies zero accounting profit.In the long run, if price is below average total cost, then it pays to just shut down.The shapes of long-run cost curves follow directly from the assumption of a fixed factor of production, which implies diminishing returns.The optimal scale of plant is the scale of plant that maximizes average cost.In the long-run competitive equilibrium, each individual firm chooses a scale of operations that minimizes its long-run average cost.In the long-run competitive equilibrium, price, short-run marginal cost, short-run average cost, and long-run average cost are all equal, and economic profits are zero.Pareto efficiency or Pareto optimality is a condition where no change is possible that will make some members of society better off without making some other members of society worse off.Freely functioning markets in the real world do not always produce an efficient allocation of resources, and this result provides a potential role for government in the economy.

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Answered: Modified True or False: State whether…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true.

Spreading overhead is the process of dividing total fixed costs by more units of output, which implies that average fixed cost declines as quantity declines.
Diminishing returns, or decreasing marginal product, imply diminishing marginal cost.
At the output level where MR = MC, if the corresponding P is above AVC but below ATC, the loss-minimizing move is to shut down or stop production.
A firm that is breaking even, or earning a zero level of profit, is one that is earning exactly a normal rate of return, which implies that new investors are not attracted, but current ones are not running away either.
Zero economic profit implies zero accounting profit.
In the long run, if price is below average total cost, then it pays to just shut down.
The shapes of long-run cost curves follow directly from the assumption of a fixed factor of production, which implies diminishing returns.
The optimal scale of plant is the scale of plant that maximizes average cost.
In the long-run competitive equilibrium, each individual firm chooses a scale of operations that minimizes its long-run average cost.
In the long-run competitive equilibrium, price, short-run marginal cost, short-run average cost, and long-run average cost are all equal, and economic profits are zero.
Pareto efficiency or Pareto optimality is a condition where no change is possible that will make some members of society better off without making some other members of society worse off.
Freely functioning markets in the real world do not always produce an efficient allocation of resources, and this result provides a potential role for government in the economy.

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