When the long-run average cost curve is downward sloping,
A) economies of scale are present.
B) diseconomies of scale are present.
C) the firm experiences constant returns to scale.
D) the average fixed cost curve must be upward sloping.
E) The premise of the question is wrong because long-run average cost curves never slope downward.

Question

Quizplus · Accepted Answer

When the long-run average cost curve is downward sloping, it indicates that economies of scale are present. This means that as a firm increases its production, its average cost of production decreases, leading to increased efficiency and profitability.

When the Long-Run Average Cost Curve Is Downward Sloping