If the long-run average cost of producing 50 units of Good X is $3.00 and the long run average cost of producing 51 units of Good X is $3.25, the firm is
A) experiencing economies of scale in the range of 50 to 51.
B) experiencing constant returns to scale in the range of 50 to 51.
C) experiencing diseconomies of scale in the range of 50 to 51.
D) operating at the minimum efficient scale.

Question

Quizplus · Accepted Answer

The increase in the long-run average cost from $3.00 to $3.25 when producing one additional unit (50 to 51) indicates that the firm is experiencing diseconomies of scale, meaning that the cost per unit is increasing as production increases. Therefore, option C is the correct answer. Options A and B are incorrect because these refer to economies or constant returns to scale, which are not observed in this scenario. Option D is also incorrect, as the minimum efficient scale is the lowest point on the long-run average cost curve, and we do not have enough information to determine whether the firm is operating at this point.

If the Long-Run Average Cost of Producing 50 Units of Good