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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

Medium

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.

When the average cost is rising, then.

Solution

✅ Correct Option: 4

Option 1 -> Marginal cost equals total cost only when quantity is 1, not related to rising AC.

Option 2 -> Marginal cost equals average cost only at the minimum point of AC curve.

Option 3 -> When MC < AC, the average cost is falling, not rising.

Option 4 -> When MC > AC, each additional unit costs more than the average, pulling the average upward.

Hence, Marginal cost > Average cost -> When marginal cost exceeds average cost, each additional unit produced costs more than the current average. This higher marginal cost pulls the average cost upward, causing it to rise. This is a fundamental relationship: MC intersects AC at AC's minimum point; when MC > AC, AC is rising; when MC < AC, AC is falling. Think of it like test scores - if your new score (marginal) is higher than your current average, your average goes up. -> correct

More from this set:

Question 41

As long as average cost is falling

Question 42

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

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.

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