If a firm's average cost is falling (economies of scale)with output,then

Question

Quizplus · Accepted Answer

If a firm's average cost is falling with output, it means that the firm is experiencing economies of scale. This means that as output increases, the firm's cost per unit of output decreases. Since marginal cost is the cost of producing an additional unit of output, if the firm is experiencing economies of scale, it means that the cost of producing an additional unit of output (marginal cost) is less than the average cost of all units produced so far. Therefore, the correct answer is A.

If a Firm's Average Cost Is Falling (Economies of Scale)with