The long-run market supply curve in the presence of internal economies of scale is ________,and in the presence of external economies of scale,it is ________.
A) downward sloping; downward sloping
B) upward sloping; horizontal
C) horizontal; upward sloping
D) downward sloping; horizontal
E) upward sloping; downward sloping

Question

Quizplus · Accepted Answer

Internal economies of scale refer to cost savings realized by a firm as a result of expanding its own production, such as through specialization and the use of more efficient equipment. This leads to a downward sloping long-run supply curve, as the firm can produce and supply more at lower costs as it increases its scale of production.

External economies of scale, on the other hand, refer to cost savings realized by an industry as a whole as a result of factors such as improved transportation, shared technology, and a skilled labor pool. This leads to a horizontal or even upward sloping long-run supply curve, as multiple firms can benefit from these external factors and expand their production at the same or even lower costs. However, the upward slope is generally less steep than in the case of external diseconomies of scale.

The Long-Run Market Supply Curve in the Presence of Internal