Assume that you observe the long-run average cost curve of a local Bookstores, a national chain.Starting from the point on the curve where output is zero and moving to the right, which of the following lists the behaviour of long-run average costs in the correct sequence (that is, which will be observed first, second, etc.)?
A)Minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale
B)Economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale
C)Constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale
D)Economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale

Question

Quizplus · Accepted Answer

The correct sequence when moving from zero output to higher levels of output is first experiencing economies of scale as average costs decrease with increased production, then reaching the minimum efficient scale where the firm is most efficient, followed by constant returns to scale where average costs stabilize, and finally, diseconomies of scale where average costs increase with further increases in output.

Assume That You Observe the Long-Run Average Cost Curve of a Local