Exhibit 8-10
-Economies and diseconomies of scale are the reasons

Question

Exhibit 8-10 
-Economies and diseconomies of scale are the reasons

Quizplus · Accepted Answer

Economies of scale refer to the situation where a firm's long-run average total cost decreases as it increases its scale of production. This is due to factors such as specialization, bulk purchasing, and technological improvements. Diseconomies of scale, on the other hand, refer to the situation where a firm's long-run average total cost increases as it increases its scale of production. This may be due to factors such as managerial inefficiencies and communication breakdowns. Therefore, the correct answer is E, which states that long-run average cost decreases and then increases as a result of economies and diseconomies of scale.

Exhibit 8-10 -Economies and Diseconomies of Scale Are the Reasons