The figure below shows a family of cost curves for a firm. The subscripts 1, 2, and 3 for the SRATC curves refer to different plant sizes. FIGURE 8-3
-Refer to Figure 8-3. Suppose this firm is producing output level Q₃ with plant size 2. Now suppose this firm changes to plant size 3 and is producing output level Q5. We can say that
A) output has increased exactly in proportion to the increase in inputs.
B) output has increased less than in proportion to the increase in inputs.
C) output has increased more than in proportion to the increase in inputs.
D) this firm has experienced economies of scale.
E) the firm is then operating with the optimal plant size.

Question

The figure below shows a family of cost curves for a firm. The subscripts 1, 2, and 3 for the SRATC curves refer to different plant sizes.  FIGURE 8-3
-Refer to Figure 8-3. Suppose this firm is producing output level Q₃ with plant size 2. Now suppose this firm changes to plant size 3 and is producing output level Q5. We can say that
A) output has increased exactly in proportion to the increase in inputs. 
B) output has increased less than in proportion to the increase in inputs. 
C) output has increased more than in proportion to the increase in inputs. 
D) this firm has experienced economies of scale. 
E) the firm is then operating with the optimal plant size.

Quizplus · Accepted Answer

The Answer of The figure below shows a family of cost curves for a firm. The subscripts 1, 2, and 3 for the SRATC curves refer to different plant sizes.  FIGURE 8-3
-Refer to Figure 8-3. Suppose this firm is producing output level Q₃ with plant size 2. Now suppose this firm changes to plant size 3 and is producing output level Q5. We can say that
A) output has increased exactly in proportion to the increase in inputs. 
B) output has increased less than in proportion to the increase in inputs. 
C) output has increased more than in proportion to the increase in inputs. 
D) this firm has experienced economies of scale. 
E) the firm is then operating with the optimal plant size.

The Figure Below Shows a Family of Cost Curves for a Firm