At a particular output level, if a firm's long- run marginal cost is $10 and its long- run average cost is $10, the firm is likely to be experiencing _______.

Question

Quizplus · Accepted Answer

If the long-run marginal cost is equal to the long-run average cost, then the firm is operating at constant returns to scale. This means that the firm's output level is optimal and it is operating at the lowest possible average cost. Economies of scale would be present if the long-run average cost is decreasing, while diseconomies of scale would occur if the long-run average cost is increasing. Sunk costs are irrelevant to the given situation.

At a Particular Output Level, If a Firm's Long- Run