Figure 8-11
Figure 8-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 8-11.For output rates greater than 20,000 picture frames per month

Question

Figure 8-11
  Figure 8-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 8-11.For output rates greater than 20,000 picture frames per month

Quizplus · Accepted Answer

The long-run average cost curve for the firm is upward sloping after a certain output level, indicating diseconomies of scale. This means that as output increases beyond a certain level (in this case, beyond 20,000 picture frames per month), the average cost of production per unit increases. This suggests that the firm may experience difficulties and inefficiencies in managing its resources and coordinating its activities as it grows bigger, leading to higher costs.

Figure 8-11 Figure 8-11 Illustrates the Long-Run Average Cost Curve