Suppose that when a firm increases output by 50%,long-run total cost increases by less than 50%.The firm will experience
A)diminishing marginal returns.
B)decreasing marginal rate of technical substitution.
C)economies of scale
D)diseconomies of scale

Question

Suppose that when a firm increases output by 50%,long-run total cost increases by less than 50%.The firm will experience
A)diminishing marginal returns.
B)decreasing marginal rate of technical substitution. 
C)economies of scale
D)diseconomies of scale

Quizplus · Accepted Answer

When the long-run total cost increases by less than the corresponding increase in output, the firm is experiencing economies of scale. This indicates that as the firm increases its scale of production, it is able to achieve cost savings due to factors such as specialization, bulk purchasing, and better utilization of capital equipment. Therefore, the best choice is C - economies of scale.

Suppose That When a Firm Increases Output by 50%,long-Run Total