Exhibit 9.1

-Refer to Exhibit 9.1,which shows the long-run average cost of a firm.The downward-sloping long-run average cost curve indicates that this firm can supply market demand _____
A)at a lower average cost per unit than two or more firms each producing a smaller amount of output.
B)at a lower average cost per unit than two or more firms each producing a larger amount of output.
C)at a higher average cost per unit than two or more firms each producing a larger amount of output.
D)at a higher average cost per unit than two or more firms each producing a smaller amount of output.
E)at the same average cost per unit as two or more firms each producing a larger amount of output.

Question

Exhibit 9.1
 
-Refer to Exhibit 9.1,which shows the long-run average cost of a firm.The downward-sloping long-run average cost curve indicates that this firm can supply market demand _____
A)at a lower average cost per unit than two or more firms each producing a smaller amount of output. 
B)at a lower average cost per unit than two or more firms each producing a larger amount of output. 
C)at a higher average cost per unit than two or more firms each producing a larger amount of output. 
D)at a higher average cost per unit than two or more firms each producing a smaller amount of output. 
E)at the same average cost per unit as two or more firms each producing a larger amount of output.

Quizplus · Accepted Answer

The downward-sloping long-run average cost curve indicates that as the firm produces more output, it benefits from economies of scale, and thus, can supply market demand at a lower average cost per unit than two or more firms each producing a smaller amount of output. Therefore, option A is the correct choice.

Exhibit 9.1 -Refer to Exhibit 9.1,which Shows the Long-Run Average Cost of Long-Run