Suppose Fergie's Florist experiences ________ up to a certain point and ________ beyond that point. Its long-run average cost curve is most likely to be U-shaped.
A) diseconomies of scale; economies of scale
B) constant returns to scale; economies of scale
C) diseconomies of scale; constant returns to scale
D) economies of scale; diseconomies of scale

Question

Quizplus · Accepted Answer

The U-shaped long-run average cost curve reflects economies of scale at low levels of output (where increasing production leads to lower average costs) and diseconomies of scale at high levels of output (where further increases in production lead to higher average costs).

Suppose Fergie's Florist Experiences ________ Up to a Certain Point