All of the following,except one,would result in lower average cost.Which is the exception?
A)An increase in output if the firm was operating below its capacity output.
B)Building a larger plant if the firm was experiencing increasing returns to scale.
C)Down-sizing the scale of operations if the firm was experiencing diseconomies of scale.
D)Down-sizing the scale of operations if the firm was experiencing constant returns to scale.

Question

Quizplus · Accepted Answer

Down-sizing the scale of operations when a firm is experiencing constant returns to scale does not lead to lower average costs. Constant returns to scale mean that increasing or decreasing the scale of operations results in a proportional increase or decrease in output, without affecting the average cost.

All of the Following,except One,would Result in Lower Average Cost