Use the following to answer question(s): Long-Run Average Cost

-(Exhibit: Long-Run Average Cost) Output per period in the region from O to A indicates that a firm is experiencing:
A) diseconomies of scale.
B) constant returns to scale.
C) economies of scale.
D) negative costs of production.

Question

Use the following to answer question(s): Long-Run Average Cost
 
-(Exhibit: Long-Run Average Cost) Output per period in the region from O to A indicates that a firm is experiencing:
A) diseconomies of scale. 
B) constant returns to scale. 
C) economies of scale. 
D) negative costs of production.

Quizplus · Accepted Answer

In the region from O to A, if a firm is experiencing a decrease in average costs as output increases, it indicates economies of scale. This means the firm is becoming more efficient, producing more at a lower average cost per unit.

Use the Following to Answer Question(s): Long-Run Average Cost