If a firm's long-run average cost curve is horizontal,the firm is experiencing economies of scale.

Question

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If the long-run average cost curve is horizontal, it indicates that the firm is experiencing constant returns to scale, where output increases proportionally with an increase in all inputs. Economies of scale occur when the long-run average cost curve slopes downward, indicating that as output increases, the average cost per unit decreases, resulting in lower costs and higher profits.

If a Firm's Long-Run Average Cost Curve Is Horizontal,the Firm