When long-run average costs decline as output increases, the firm is experiencing
A) negative returns to scale.
B) diseconomies of scale.
C) constant returns to scale.
D) economies of scale.

Question

Quizplus · Accepted Answer

When long-run average costs decline as output increases, the firm is experiencing economies of scale, meaning that the firm is able to increase its production while reducing its average costs, resulting in greater efficiency and profitability.

When Long-Run Average Costs Decline as Output Increases, the Firm