Exhibit 7-11
-Movement from point b to point c in Exhibit 7-11 indicates that the firm is experiencing
A) economies of scale
B) increasing average cost
C) economies of cost
D) a decrease in average plant size
E) diseconomies of scale

Question

Exhibit 7-11 
-Movement from point b to point c in Exhibit 7-11 indicates that the firm is experiencing
A) economies of scale 
B) increasing average cost 
C) economies of cost 
D) a decrease in average plant size 
E) diseconomies of scale

Quizplus · Accepted Answer

Movement from point b to point c indicates an increase in average cost, which means the firm is experiencing diseconomies of scale. This occurs when the firm grows too large, and the cost of producing additional units exceeds the benefit of producing them.

Exhibit 7-11 -Movement from Point B to Point C in Exhibit 7-11