On the downward sloping portion of a firm's long run average cost curve, it is experiencingGroup of answer choiceseconomies of scale.constant returns to scale.diseconomies of scale.diminishing marginal returns.
Question
On the downward sloping portion of a firm's long run average cost curve, it is experiencingGroup of answer choiceseconomies of scale.constant returns to scale.diseconomies of scale.diminishing marginal returns.
Solution
On the downward sloping portion of a firm's long run average cost curve, it is experiencing economies of scale.
Here's why:
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The long run average cost curve (LRAC) is a curve that shows the lowest possible cost an entity can attain for any level of output when all inputs are variable.
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The curve is U-shaped due to the law of diminishing returns and returns to scale.
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The downward sloping portion of the LRAC curve represents economies of scale. This is the stage where as the quantity of output increases, the average cost per unit decreases.
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This happens because the firm is able to spread its fixed costs over a larger number of units, and it may also benefit from operational efficiencies and synergies as it grows in scale.
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Therefore, on the downward sloping portion of a firm's long run average cost curve, it is experiencing economies of scale.
Similar Questions
The downward-sloping portion of the long-run average cost curve is a result ofmultiple choiceeconomies of scale.constant returns to scale.diseconomies of scale.decreasing marginal productivity.
A firm’s short-run MC curve: Group of answer choicesIs eventually upwards sloping due to diminishing marginal product.Is downward sloping due to increasing returns to scale.Is eventually upward sloping due to decreasing returns to scale.Is flat due to constant returns to scale.None of the above.
When a decrease in the scale of production leads to higher average costs, the industry exhibitsGroup of answer choicesdiminishing returns.increasing returns to scale.decreasing returns to scale.constant returns to scale.
The average fixed cost curveGroup of answer choicesalways declines with increased levels of output.always rises with increased levels of output.declines as long as it is above marginal cost.declines as long as it is below marginal cost.
If a firm experiences the diseconomies of scale, it means that:Question 8Answera.As the firm produces more, its long-run average total cost increases.b.As the firm produces more, its long-run average total cost decreases.c.The firm is operating at the minimum efficient scale.d.The firm is in a competitive market.
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