Asked by Amber Koeuth on Apr 24, 2024
Verified
If an industry's long-run average total cost curve has an extended range of constant returns to scale,this implies that:
A) technology precludes both economies and diseconomies of scale.
B) the industry will be a natural monopoly.
C) both relatively small and relatively large firms can be viable in the industry.
D) the industry will be comprised of a very large number of small firms.
Constant Returns to Scale
A situation in economic production where increasing all inputs by any proportionate amount results in output increasing by the same proportion.
Long-Run Average Total Cost Curve
A graphical representation that shows the lowest possible cost at which a firm can produce any given level of output when all inputs are variable.
Technology
The application of scientific knowledge for practical purposes, especially in industry.
- Comprehend how scale economies influence the configuration of industry landscapes and the nature of market rivalry.
Verified Answer
SR
Syafiqah Rosli1203May 02, 2024
Final Answer :
C
Explanation :
The extended range of constant returns to scale means that both small and large firms can operate efficiently in the industry. This suggests that the industry does not have significant barriers to entry, as a natural monopoly would. Additionally, the availability of constant returns to scale implies that technology does not necessarily lead to economies or diseconomies of scale.
Learning Objectives
- Comprehend how scale economies influence the configuration of industry landscapes and the nature of market rivalry.