Exhibit 7-16 Long-run average cost curves

Which firm in Exhibit 7-16 displays a long-run average cost curve with economies of scale throughout the range of output shown?
A) Firm A.
B) Firm B.
C) Firm C.
D) Firms A and B.

Question

Exhibit 7-16 Long-run average cost curves

Which firm in Exhibit 7-16 displays a long-run average cost curve with economies of scale throughout the range of output shown?
A) Firm A. 
B) Firm B. 
C) Firm C. 
D) Firms A and B.

Quizplus · Accepted Answer

Firm C displays a long-run average cost curve with economies of scale throughout the range of output shown, as the cost per unit decreases as production increases. Firm A and B both exhibit diseconomies of scale at higher levels of output, meaning their cost per unit increases as production increases.

Exhibit 7-16 Long-Run Average Cost Curves