When a firm's average total cost curve is downward-sloping,
A)one firm can charge a higher price than multiple firms.
B)one firm can always produce more cheaply than multiple firms.
C)multiple firms in a market can charge a lower price than one firm.
D)a larger number of firms in a market is better than a smaller number of firms.
E)multiple firms can produce more cheaply than one firm.

Question

Quizplus · Accepted Answer

When a firm's average total cost curve is downward-sloping, it means that the firm is experiencing economies of scale, which refers to the cost advantages that a firm enjoys as it increases its output. This means that as the firm produces more output, it is able to spread its fixed costs over a larger number of units, leading to lower average total costs. Therefore, one firm can always produce more cheaply than multiple firms, making choice B the correct answer.

When a Firm's Average Total Cost Curve Is Downward-Sloping