5 Steps to a 5 AP Microeconomics, 2014-2015 Edition

112 › Step 4. Review the Knowledge You Need to Score High

3. Diseconomies of scaleare illustrated by the rising part of the LRAC curve and can
   occur if a firm becomes too large.
   a. Some reasons for this include distant management, worker alienation, and prob-
   lems with communication and coordination.

Quantity

Price $

SRAC 1

SRAC 2 SRAC 3 SRAC^4

100 250 400

a

b

c d

e

Figure 8.7

Quantity

Price $

LRAC

Economies

of Scale

Constant

Returns to

Scale

Diseconomies

of Scale

Figure 8.8

1. Which of the following is most likely an example
   of production inputs that can be adjusted in the
   long run, but not in the short run?

(A) Amount of wood used to make a desk.

(B) Number of pickles put on a sandwich.

(C) The size of a McDonald’s kitchen.

(D) Number of teacher’s assistants in local high

schools.

(E) The amount of electricity consumed by a

manufacturing plant.

2. The Law of Diminishing Marginal Returns is
   responsible for

(A) AVC that first rises, but eventually falls, as

output increases.

(B) AFC that first rises, but eventually falls, as

output increases.

(C) MP that first falls, but eventually rises, as

output increases.

(D) MC that first falls, but eventually rises, as

output increases.

(E) ATC that first rises, but eventually falls, as

output increases.

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