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Cost Curve

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Indicate whether each of the following involves an upward or downward shift in the long-run average cost curve or instead involves a leftward or rightward movement along a given curve. Also indicate whether each will have an increasing, decreasing or uncertain effect on the level of average costs.
1. A rise in wage rates
2. A decline in output
3. An energy-saving technical change
4. A fall in interest rates
5. An increase in learning or experience

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1. A permanent rise in wage rate will increase the long run cost curve shifting it upwards. This is because as wage rate increases, the total cost to the company increases.

2. A decline in output will have an uncertain impact on the cost curves. If the decline in output is in the ...

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