If a hospital is experiencing economies of scale,

Question

Quizplus · Accepted Answer

If a hospital is experiencing economies of scale, its average cost curve is negatively sloped as output increases. This means that as the hospital produces more, its average cost per unit decreases. Therefore, reducing output level would not lower costs as suggested in option C. Option D is also incorrect as economies of scale do not necessarily indicate falling quality with rising output. Option A is also incorrect as a positively sloped average cost curve represents diseconomies of scale, where the average cost per unit increases as output increases.

If a Hospital Is Experiencing Economies of Scale