A firm has a total cost function of C(Q)= 75 + 25Q^1/2.The firm experiences: A) economies of scale. B) diseconomies of scale. C) constant returns to scale. D) All of the statements associated with this question are correct.

Question

Quizplus · Accepted Answer

Economies of scale occur when an increase in output leads to a lower average cost per unit. The given cost function C(Q) = 75 + 25Q suggests that as Q (quantity produced) increases, the total cost increases at a constant rate (25 per unit of Q), indicating that the average cost decreases as production increases, which is characteristic of economies of scale.

A Firm Has a Total Cost Function of C(Q)= 75