The shape of the long-run average cost curve reflects _____.
A)market demand
B)economies and diseconomies of scale
C)increasing and diminishing marginal returns
D)productivity of fixed inputs
E)the law of diminishing returns

Question

The shape of the long-run average cost curve reflects _____.​
A)market demand
B)economies and diseconomies of scale​
C)increasing and diminishing marginal returns​
D)productivity of fixed inputs​
E)the law of diminishing returns​

Quizplus · Accepted Answer

The long-run average cost curve reflects economies and diseconomies of scale. As the scale of production increases, there are economies of scale which lower the average cost. However, beyond a certain point, the firm experiences diseconomies of scale which increase the average cost. The shape of the curve reflects the balance between these two factors.

The Shape of the Long-Run Average Cost Curve Reflects _____