Economies to scale are illustrated by
A) a downward sloping long-run average cost curve.
B) a horizontal long-run average cost curve.
C) an upward sloping long-run average cost curve.
D) a long-run average cost curve that is shaped like an upside down U.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that a business may gain as its scale of production increases. This means that the average cost of production decreases as output increases. This relationship is illustrated by a downward sloping long-run average cost curve. As the production scale increases, a business can spread its fixed costs (such as equipment) over more units of output, which reduces the average cost per unit. Therefore, choice A is the correct answer.

Economies to Scale Are Illustrated by