Economies of scale exist where the long-run average cost curve is
A) horizontal.
B) downward sloping.
C) upward sloping.
D) tangent to the marginal cost curve.

Question

Quizplus · Accepted Answer

Economies of scale exist where the long-run average cost curve is downward sloping. This means that as output increases, the average cost per unit decreases. This is because fixed costs can be spread over a larger output, leading to lower average costs. This is typically seen in industries with high fixed costs, such as manufacturing and utilities.

Economies of Scale Exist Where the Long-Run Average Cost Curve