A firm is considering changing its plant size.It calculates the amount of output it would be able to produce and the total cost for various plant sizes,as shown in the accompanying table.If the firm is currently using plant size C,the firm is experiencing which of the following?

Question

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The table shows that as the firm changes its plant size from A to C, the total cost per unit of output decreases from $6 to $4. However, if the firm were to increase its plant size beyond C to D or E, the total cost per unit of output would increase to $5 and $7, respectively. This indicates that the firm is currently experiencing economies of scale with plant size C, but if it were to increase its plant size further, it would enter the range of diseconomies of scale where the cost per unit of output increases with the level of production.

A Firm Is Considering Changing Its Plant Size