When a firm realizes economies of scale, the short-run average total cost curve slopes downward.

Question

Quizplus · Accepted Answer

Economies of scale refer to the reduction in long-run average and marginal costs arising from an increase in the size of an operating unit (a factory or plant, for example). The short-run average total cost curve can slope downward due to increasing returns to a fixed factor, but economies of scale specifically relate to changes in the long-run average cost.

When a Firm Realizes Economies of Scale, the Short-Run Average