If in the long run, a firm doubles its output and its average cost falls as a result:

Question

Quizplus · Accepted Answer

When a firm's output doubles and its average cost falls, it indicates that the firm is experiencing economies of scale. This means that as the firm produces more, it is able to take advantage of efficiencies and cost savings in production, resulting in lower average costs. This is different from diminishing returns, which occurs when a firm increases its production but experiences a decrease in marginal returns. Technological progress can also lead to lower average costs, but the question does not provide any indication that this has occurred. The firm does not necessarily have to be a natural monopoly for this to happen. Therefore, option C is the best choice.

If in the Long Run, a Firm Doubles Its Output