Homework Answers
Answer: D. Downward sloping; economies of scale.
When the firm increases output and the costs rise disproportionately slower, then the long-run average cost curve is downward sloping and the firm is experiencing economies of scale.
When the firm increases its output, and the total cost rises at a decreasing rate, then the average cost of production gradually falls with the rise in output. So over time, as the average cost falls, the long-run average cost curve slopes downward. In this range, the firm experiences economies of scale.
In the above figure, we are measuring
quantity of output(Q) on the horizontal axis, and the average cost
of production on the vertical axis. The curve 'LAC' is the long-run
average cost curve.On the 'TL' portion of the LAC, we see that as
output rises, the average cost of production decreases. So in this
range, the LAC is downward sloping. As the average cost of
production falls in this 'TL' range of output, the firm is
experiencing economies of scale(ES).
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Select the correct answer below:
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Which of the following statements is
accurate?
Select the correct answer below:
A. when the long-run average cost (LRAC)
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B. when the long-run average cost (LRAC)
increases as output increases, a firm is experiencing diseconomies
of scale.
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increases as output increases, a firm is experiencing economies of
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