23. Which costs are measured on per-unit basis: fixed costs, average cost, average variable cost, variable

costs, and marginal cost?

24. What is a production technology?

25. In choosing a production technology, how will firms react if one input becomes relatively more expensive?

26. What is a long-run average cost curve?

27. What is the difference between economies of scale, constant returns to scale, and diseconomies of scale?

28. What shape of a long-run average cost curve illustrates economies of scale, constant returns to scale, and

diseconomies of scale?

29. Why will firms in most markets be located at or close to the bottom of the long-run average cost curve?

Critical Thinking Questions

30. Small “Mom and Pop firms,” like inner city grocery stores, sometimes exist even though they do not earn

economic profits. How can you explain this?

31. A common name for fixed cost is “overhead.” If you divide fixed cost by the quantity of output produced,
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