When all of a firm's inputs are doubled,input prices do not change,and this results in the firm's level of production more than doubling,a firm is operating:
A)on the upward-sloping portion of its long-run average total cost curve.
B)on the downward-sloping portion of its long-run average total cost curve.
C)at the minimum of its long-run average total cost curve.
D)on the upward-sloping portion of its marginal cost curve.

Question

Quizplus · Accepted Answer

This scenario describes economies of scale, which occur when a firm's level of production more than doubles in response to a doubling of inputs, while input prices remain constant. Economies of scale are experienced on the downward-sloping portion of the long-run average total cost curve, where the firm's average costs decrease as output expands. Therefore, the best answer is B - on the downward-sloping portion of its long-run average total cost curve.

When All of a Firm's Inputs Are Doubled,input Prices Do