Which of the following is not true when there are large economies of scale such that one firm can produce at a lower average cost than can be achieved by multiple firms?
A) This situation produces a natural monopoly.
B) Proportional increases in output yield proportionally small increases in total cost.
C) The long-run average cost curve of the firm will increase at a low level of output.
D) There will only be one firm in this industry.

Question

Quizplus · Accepted Answer

When there are large economies of scale, the long-run average cost curve of the firm will decrease as output increases. Therefore, the statement in (C) that the long-run average cost curve will increase at a low level of output is not true.

Which of the Following Is Not True When There Are