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3. Identifying returns to scale Aa Aa E The following graph depicts the short run total expenditures (TE) and long-run total
The relationship between the short-run average expenditures and the long-run average cost for this firm is best represented b
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3. Identifying returns to scale Aa Aa E The following graph depicts the short run total expenditures (TE) and long-run total

Graph B. The relationship between short run average expenditure and long run average cost for this firm is represented by Graph B. because long run average cost curve is the envelope of the short run average cost curve of the firm. The industry exhibits economies of scale because average total cost curve is falling.

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