Exhibit 7-14 Cost curves
-In Exhibit 7-14, the U-shaped LRAC curve indicates which of the following as quantity increases from 0 to 4,000?

Question

Exhibit 7-14 Cost curves 
-In Exhibit 7-14, the U-shaped LRAC curve indicates which of the following as quantity increases from 0 to 4,000?

Quizplus · Accepted Answer

The U-shaped LRAC curve typically indicates that initially, as quantity increases, the firm experiences economies of scale (decreasing average costs), followed by constant returns to scale, and eventually diseconomies of scale (increasing average costs).

Exhibit 7-14 Cost Curves