Multiple Choice QuestionHow do economies of scale affect long-run average total costs for a firm?Multiple choice question.Long-run average total costs remain the same over a wide range of output.Long-run average total costs decline over a wide range of output.Long-run average total costs rise over a wide range of output.Not enough information is provided to determine the answer.
Question
Multiple Choice QuestionHow do economies of scale affect long-run average total costs for a firm?Multiple choice question.Long-run average total costs remain the same over a wide range of output.Long-run average total costs decline over a wide range of output.Long-run average total costs rise over a wide range of output.Not enough information is provided to determine the answer.
Solution
The correct answer is: Long-run average total costs decline over a wide range of output.
Here's why:
Economies of scale refer to the cost advantage that a business obtains due to expansion. That is, as the output of a firm increases, the long-run average total cost of production decreases. This is because as a firm expands its production in the long run, it can spread out its fixed costs over a larger quantity of output, which reduces the per-unit cost. This is why the long-run average total cost curve is typically downward sloping, indicating that costs decline as output increases. Therefore, economies of scale lead to a decline in long-run average total costs over a wide range of output.
Similar Questions
Economies of scale occur when a firm’sGroup of answer choicesmarginal costs are constant as output increases.long-run average total costs are decreasing as output increases.long-run average total costs are increasing as output increases.marginal costs are equal to average total costs for all levels of output.
Fill in the Blank QuestionFill in the blank question.A firm's long-run average total costs may decline over a wide range of output due to of scale.
Which statement is true? Long-run average costs are the same or more than short-run average costs. Long-run average costs equal long-run marginal costs for every level of output. None of these answers is correct. You Answered Long-run average costs are increasing due to diminishing marginal product. Correct Answer Long-run average costs are the lower envelope of short-run average cost curves.
What is implied when a firm experiences constant returns to scale?The firm's long-run average cost decreases as it produces more output.The firm's long-run average cost increases as it produces more output.The firm's long-run average cost remains constant as it produces more output.The firm's long-run average cost fluctuates irregularly as it produces more output
At every output level, a firm’s short-run average cost (SAC) equals or exceeds its long-run average cost (LAC) because:a. Diminishing returns apply in the short run.b. Returns to scale only exist in the long run.c. Opportunity costs are taken into account in the short run.d. There are at least as many possibilities for substitution between factors of productionin the long run as in the short run.e. Economies of scope only apply in the long run.
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