If an increase in production increases your firm's short- run average total cost, your firm is likely experiencing ________and should consider ________ output levels.

Question

If an increase in production increases your firm's short- run average total cost, your firm is likely experiencing  ________and should consider ________ output levels.

Quizplus · Accepted Answer

If an increase in production increases the short-run average total cost, it means the firm is experiencing diseconomies of scale. This happens when the firm's output increases but the cost per unit of output increases as well. To cope with this situation, the firm should consider contracting its output levels, meaning producing fewer goods to reduce the unit cost.

If an Increase in Production Increases Your Firm's Short- Run