Asked by Aracelli Garcia on Jun 06, 2024
Verified
When a firm experiences economies of scale,
A) short-run average total cost is maximized.
B) long-run average total cost is maximized.
C) long-run average total cost decreases as output increases.
D) long-run average total cost increases as output increases.
Economies of Scale
Describe the cost advantages that enterprises obtain due to the scale of their operations, typically resulting in reduced costs per unit with increased output.
Long-run Average Total Cost
The average cost per unit of output when all inputs, even physical capital, are adjustable, over a sufficient time period.
- Master the subject matter relating to economies of scale, diseconomies of scale, and constant returns to scale.
- Assess the implications of output fluctuations on the cost structure of a firm in the long-term.
Verified Answer
GS
George SandersJun 09, 2024
Final Answer :
C
Explanation :
Economies of scale occur when long-run average total cost decreases as output increases, indicating that the firm becomes more efficient in production as it scales up.
Learning Objectives
- Master the subject matter relating to economies of scale, diseconomies of scale, and constant returns to scale.
- Assess the implications of output fluctuations on the cost structure of a firm in the long-term.