If the average total cost of producing 20 sweaters an hour falls when the firm doubles all its inputs, then the
A) short-run average total cost curve shifts upward because all inputs have increased.
B) firm moves along its short-run average total cost curve.
C) firm experiences economies of scale.
D) long-run average cost curve shifts downward.

Question

Quizplus · Accepted Answer

When a firm doubles all its inputs and the average total cost falls, it indicates that the firm is experiencing economies of scale, where increasing production leads to lower average costs.

If the Average Total Cost of Producing 20 Sweaters an Hour