QUESTION 17 Please select all that are true regarding Minimum Efficient Scale (MES):

A. Quantities greater than MES exhibit decreasing returns to scale due to diminishing marginal returns on input quantities.

B. MES is the quantity produced where total average costs for a firm are at a minimum

C. MES is the quantity supplied where variable costs for a firm are at a minimum

D. Quantities (x-axis) less than MES exhibit increasing returns to scale.

E. Average costs do not include variable cost since they change

F. Long run average costs include fixed cost

G. If the quantity demanded is less than Qmes, then the lowest cost solution is for two firm to supply the market

QUESTION 18 Please select all that are true regarding profit:

A. Profits are the main driver of HH behavior since they represent income to HH, which own the firms.

B. Profits always increase with cost decreases

C. Profits are net of costs to the firm

D. At zero sales, the firm may still have a loss

E. Profits may increase as sales decrease

F. Profits always decrease with lower quantity of output

G. Profits come from total net value of unit sales being greater than fixed cost