When a firm's long-run average total cost falls as its output increases,the firm is experiencing
A) economies of scale.
B) diseconomies of scale.
C) constant returns to scale.
D) decreasing marginal returns.
E) decreasing cost of marginal returns.

Question

Quizplus · Accepted Answer

If the firm's long-run average total cost falls as its output increases, it implies that the firm is able to produce at a lower cost per unit as it increases its production scale. This is known as economies of scale. As the firm increases production, it benefits from greater specialization, more efficient use of capital and labor, and increased bargaining power with suppliers. This results in lower average costs, lower prices, and increased profitability.

When a Firm's Long-Run Average Total Cost Falls as Its