Economies of scale are indicated by
A)declining long-run AVC.
B)declining long-run AFC.
C)declining long-run AC.
D)declining long-run TC.

Question

Quizplus · Accepted Answer

Economies of scale occur when the long-run average cost (AC) of producing a good or service decreases as the level of production increases. This means that the cost per unit of output decreases with greater production. Therefore, the correct answer is choice C, as declining long-run AC indicates economies of scale. Declining long-run AVC and long-run TC may also occur, but they are not necessarily indicative of economies of scale as they may be affected by other factors such as changes in input prices or technology. Declining long-run AFC is not relevant to determining economies of scale as it only measures fixed costs per unit of output.

Economies of Scale Are Indicated by