Question

Consider the table, which contains hypothetical data on the long‑run average cost values for the refrigerator industry.
  

	Quantity produced	Long‑run average cost
A	10,000	$1,200
B	20,000	$900
C	30,000	$700
D	40,000	$700
E	50,000	$800
F	60,000	$1,000

Fill in with letters:
Economies of scale begin at ____ and end at _____

Constant returns to scale begin at ____ and end at _____

Diseconomies of scale begin at ____ and end at ______

Answer 1

	Quantity produced	Long‑run average cost
A	10,000	$1,200
B	20,000	$900
C	30,000	$700
D	40,000	$700
E	50,000	$800
F	60,000	$1,000

Economies of scale begin at point A (10,000) and end at point (C 30,000)

With the increase in the quantity produced if the Long Run Average Cost decreases, it is called economies of scale. Economies of scale are the responsible factors because of which the LRAC decrease.

Constant returns to scale begin at point C (30,000) and end at point D (40,000)

If the LRAC remains constant with the increase in the output, it is called constant returns to scale.

Diseconomies of scale begin at D (40,000) and end at point F (60,000)

In diseconomies of scale, the LRAC increases with the increase in the quantity produced.