If a firm has a U-Shaped long-run average cost curve, a
a.) its fixed cost rises as output rises.
b.) it must have increasing returns to scale at low levels or production and decreasing returns to scale at high levels of production.
C.) it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production.
D.) the firm can maximize its output by operating at the point of minimum long run average.
You have given four options which are are possisible implication of the U-shape average cost curve. Here, answer is option (c)
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#8 8. The long-run average cost curve is the envelope of the firm's short-run average cost...
#8
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#8
8. The long-run average cost curve is the envelope of the firm's short-run average cost curves, and it reflects the presence or absence of returns to scale. When there are increasing returns to scale initially and then decreasing returns to scale, the long-run average cost curve is U-shaped, and the envelope does not include all points of minimum short-run average cost.
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In the short run, there are many U-shaped cost curves. Which of the following explains why the ATC is that way in the short run? It is U-shaped because the minimum efficient scale is achieved. It is U-shaped because the AFC declines as more goods are produced. It is U-shaped because of economies and diseconomies of scale. It is not U-shaped. It is U-shaped because of increasing and decreasing returns. If a firm is experiencing economies of scale, what is...
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