Exhibit 7-16 Long-run average cost curves
-Which firm in Exhibit 7-16 displays a long-run average cost curve with economies of scale throughout the range of output shown?

Question

Exhibit 7-16 Long-run average cost curves 
-Which firm in Exhibit 7-16 displays a long-run average cost curve with economies of scale throughout the range of output shown?

Quizplus · Accepted Answer

Firm C displays a long-run average cost curve with economies of scale throughout the range of output shown. As output increases, the average cost decreases, indicating that the firm is experiencing economies of scale. Firms A and B display decreasing returns to scale and constant returns to scale, respectively, as the range of output shown.

Exhibit 7-16 Long-Run Average Cost Curves