Question

(Click to select) economies of scale a. Long-run average total cost falls as the firm realize: rises when the firm experiences [ (Click to select) diseconomies of scale diminishing marginal returns increasing marginal returns b. The minimum efficient scale is the level of output produced by the smallest firm in the industry. smallest level of output at which a firm can produce. only level of output where long-run average total costs are minimized. smallest level of output needed to attain all economies of scale and minimum long-run average total cost. es c. If the long-run average total cost drops quickly to its minimum point and then rises abruptly, the industry will likely be Ocomposed of a few small firms. in a state of expansion. composed of many small firms. in a state of decline

Answer 1

Answer:

a. Economies of scale; diseconomies of scale. In the falling portion of LRAC curve, firm experiences increasing returns to scale whereas, in the rising portion, there is decreasing returns to scale.

b. Minimum efficient scale is at that output level where LRAC is minimized. Here SRAC and LRAC both are at their minimum level.

c. Composed of many small firms. A small minimum efficient scale signifies highly competitive market having large number of small firms and all of them have achieved productive efficiency.