Asked by Jordan Strickland on May 01, 2024
Verified
The long-run average cost curve will be upward-sloping when the firm has:
A) economies of scale.
B) diseconomies of scale.
C) constant returns to scale.
D) diminishing returns.
Diseconomies of Scale
The scenario where a company or firm experiences an increase in marginal costs when output is increased.
Long-Run Average Cost
The average cost per unit of output when all inputs, including physical capital, are variable in the long term.
Upward-Sloping
A graph line that increases in height as it moves from left to right, characteristic of certain supply curves.
- Absorb the fundamentals of economies of scale, constant returns to scale, and diseconomies of scale.
- Investigate the impact of scale dimensions on the costs of production in the immediate and extended future.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
B
Explanation :
When a firm experiences diseconomies of scale, it means that as it increases its production, its long-run average costs begin to increase as well. This could happen due to a variety of reasons such as increased complexity in managing larger production levels or difficulty in coordinating and communicating within the organization. As a result, the long-run average cost curve becomes upward sloping. The other options given are not correct as they would result in a downward sloping or flat long-run average cost curve.
Learning Objectives
- Absorb the fundamentals of economies of scale, constant returns to scale, and diseconomies of scale.
- Investigate the impact of scale dimensions on the costs of production in the immediate and extended future.