If production displays economies of scale, the long-run average cost curve is
A)above the short-run average total cost curve.
B)downward sloping.
C)upward sloping.
D)below the long-run marginal cost curve.

Question

Quizplus · Accepted Answer

When production displays economies of scale, the long-run average cost curve slopes downward. This means that as the firm increases its output in the long run, the average cost of production decreases due to factors such as better utilization of resources and increased efficiency. Thus, the long-run average cost curve will lie below the short-run average total cost curve and the long-run marginal cost curve.

If Production Displays Economies of Scale, the Long-Run Average Cost