In the long run,a company should choose the plant size that yields the lowest average total cost for the desired rate of output.

Question

Quizplus · Accepted Answer

This principle is based on the idea of economies of scale, which means that as the size of the plant increases, the average cost per unit of output decreases. However, there comes a point where further increases in plant size result in diminishing returns and increased costs, so the optimal size is the one that minimizes average total cost.

In the Long Run,a Company Should Choose the Plant Size