When industry output increases,a firm would realize an external economy of scale exists when
A) its average total cost curve shifts downward
B) its average total cost curve shifts upward
C) it slides downward along its existing average total cost curve
D) it slides upward along its existing average total cost curve

Question

Quizplus · Accepted Answer

When industry output increases, a firm may benefit from external economies of scale, which means that it can take advantage of lower input costs or improved technology from other firms in the same industry. This can lead to a decrease in the firm's average total cost, and thus a shift downward in its average total cost curve. Therefore, the best choice is A. Choices B, C, and D are incorrect because they do not reflect the concept of external economies of scale.

When Industry Output Increases,a Firm Would Realize an External Economy