A firm is operating in its range of economies of scale and is on both its LRAC curve and its short-run ATC curve. At that level of output, the slope of its LRAC curve is
A) zero and the slope of its ATC curve is zero.
B) zero and the slope of its ATC curve is negative.
C) negative and the slope of its ATC curve is zero.
D) negative and the slope of its ATC curve is negative.

Question

Quizplus · Accepted Answer

When a firm is experiencing economies of scale, the LRAC curve is downward sloping (negative slope). Since the firm is also on its short-run ATC curve, which is also downward sloping when costs are decreasing, the slope of the ATC curve is also negative.

A Firm Is Operating in Its Range of Economies of Scale