Higher input prices in large firms might lead to
A) horizontal marginal cost curves.
B) downward-sloping marginal cost curves.
C) downward-sloping long-run average cost curves.
D) upward-sloping long-run average cost curves.

Question

Quizplus · Accepted Answer

Higher input prices in large firms would increase their average costs, which would lead to upward-sloping long-run average cost curves. This is because large firms have economies of scale initially, but if input prices rise, the average cost per unit of output will increase, causing the long-run average cost curve to slope upward.

Higher Input Prices in Large Firms Might Lead to