Exhibit 7-11
-Movement from point a to point b 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 a to point b 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

Economies of scale occur when the average cost of production decreases as the quantity of output increases. In Exhibit 7-11, movement from point a to point b indicates that the firm is producing more output at a lower average cost, which is consistent with economies of scale.

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