When there are economies of scale in production, what can we conclude?
A) Marginal cost increases as output expands.
B) Marginal product of an input diminishes with increased utilization.
C) Long-run average total cost declines as output expands.
D) Long-run average total cost increases as output expands.

Question

Quizplus · Accepted Answer

Economies of scale in production means the cost per unit of output decreases as the output increases. This leads to a decline in long-run average total cost (LRATC) as more units are produced. Therefore, option C is correct. Option A is incorrect as marginal cost can either remain constant or decrease with increased output in economies of scale. Option B is incorrect as the marginal product of an input may not necessarily diminish in economies of scale. Option D is incorrect as long-run average total cost would not increase but decline as output expands in economies of scale.

When There Are Economies of Scale in Production, What Can