If a firm experiences gains from specialization as it increases its scale of production,we would expect its long-run average cost curve to be

Question

Quizplus · Accepted Answer

The presence of gains from specialization leads to a downward-sloping long-run average cost curve (LRAC) as the firm produces more. Specialization results in a more efficient use of resources and enables the firm to take advantage of economies of scale, which lowers the firm's average cost of production. Thus, as the firm's output increases, the LRAC decreases.

If a Firm Experiences Gains from Specialization as It Increases