AfterBoards Logo
Skip to main contentSkip to solution

CUET Economics 2025 PYQs14 May Shift 1. Free, no login required.

Micro

past year questions, CUET Economics 2025 14 May Shift 1

Production & Costs

past year questions, Micro, CUET Economics 2025 14 May Shift 1

Easy

Comprehension:

Shapes of the Long Run Cost Curves

It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Long curve downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed. For the first unit of output, both LRMC and LRAC are the same. Then, as output increases, LRAC initially falls, and then, after a certain point, it rises. As long as average cost is falling, marginal cost must be less than the average cost. When the average cost is rising, marginal cost must be greater than the average cost. LRMC curve cuts the LRAC curve from below at the minimum point of the LRAC.

In the long run marginal cost curve shape is ..........

Solution

✅ Correct Option: 3

Option 1 -> A 'V'-shaped curve implies sharp changes at the minimum point, which doesn't reflect gradual cost behavior.

Option 2 -> A horizontal curve would indicate constant marginal costs throughout all production levels, which is unrealistic.

Option 3 -> A 'U'-shaped curve correctly represents the typical long-run marginal cost pattern.

Option 4 -> A downward sloping curve would show only economies of scale without any diseconomies, which is incomplete.

Hence, Option 3: 'U'-shaped curve -> The long-run marginal cost (LRMC) curve is U-shaped because it reflects the economies and diseconomies of scale. Initially, LRMC decreases due to economies of scale (bulk purchasing, specialization, efficient use of resources). At the optimal production level, LRMC reaches its minimum. Beyond this point, LRMC increases due to diseconomies of scale (management inefficiencies, coordination problems, resource constraints). This U-shape is a fundamental characteristic of long-run cost curves in microeconomic theory. -> correct

More from this set:

Question 41

As long as average cost is falling

Question 43

When the average cost is rising, then.

Question 44

At the final level of production, a typical firm observed.

Question 45

LRMC cuts the LRAC curve from below at the point where.

Keyboard Shortcuts

  • Left arrow: Previous question
  • Right arrow: Next question
  • S key: Jump to solution
  • Q key: Jump to question

CUET Economics Past Year Questions (Topic-Wise)