Evidence from empirical studies of long-run cost-output relationships lends support to the:
A) existence of a non-linear cubic total cost function
B) hypothesis that marginal costs first decrease,then gradually increase over the normal operating range of the firm
C) hypothesis that total costs increase quadratically over the ranges of output examined
D) hypothesis that total costs increase linearly over some considerable range of output examined
E) none of the above

Question

Quizplus · Accepted Answer

Empirical studies have shown that the long-run total cost function initially exhibits economies of scale, leading to a linear relationship between total cost and output over a considerable range of output examined. This means that as output increases, total costs increase at a constant rate.

Evidence from Empirical Studies of Long-Run Cost-Output Relationships Lends Support