Page 608 - Krugmans Economics for AP Text Book_Neat

Tackle the Test: Free-Response Questions
1. Refer to the graph provided to answer the following questions.
Answer (5 points)
Cost of
unit ATC 3 ATC 6 ATC LRATC 1 point: 6
9
1 point: economies of scale
B Y
1 point: Because at an output of 3, the LRATC is decreasing.
1 point: In the long run the firm will produce on ATC 9 .
1 point: In the long run the firm will produce at point X.

A X 2. Draw a correctly labeled graph showing a short-run average
C
total cost curve and the corresponding long-run average total
cost curve. On your graph, identify the areas of economies and
0 3 4 5 6 7 8 9 Quantity
(units) diseconomies of scale.
a. The same level of fixed cost that puts the firm at point B
when the quantity is 3 minimizes short-run average total
cost for what output level?
b. At an output level of 3, is the firm experiencing economies
or diseconomies of scale? Explain.
c. In the long run, if the firm expects to produce an output of
9, the firm will produce on which short-run average total
cost curve and at which point on the graph?

566 section 10 Behind the Supply Curve: Profit, Production, and Costs