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When a firm increases its plant size in the long run and its per-unit costs fall,...

When a firm increases its plant size in the long run and its per-unit costs fall, this is called

A. diminishing returns, and is shown by the downward-sloping portion of the MP curve (or the upward-sloping portion of the MC curve).

B. constant returns to scale, and is shown by the flat portion of the LRATC curve.

C. diseconomies of scale, and is shown by the upward-sloping portion of the LRATC curve.

D. economies of scale, and is shown by the downward-sloping portion of the LRATC curve

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Answer

Option D

D. economies of scale, and is shown by the downward-sloping portion of the LRATC curve

The decrease in the LRATC is called economies of scale and it is depicted by the downward-sloping portion of the LRATC curve.

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