Economies of scale occur when the firm experiences lower average costs as a result of producing a greater quantity of output. This is represented by the downward-sloping portion of the long-run average cost curve, which shows that as output increases, the average cost per unit of output decreases. Therefore, choice A is the correct answer as it directly relates to economies of scale.

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Economies of Scale

Question 138

Multiple Choice

Economies of scale

A) account for the downward-sloping portion of the long-run average cost curve.
B) occur when an increase in resources causes a less-than-proportionate increase in output.
C) suggest that the firm's marginal cost curve lies above its average cost curve.
D) suggest that the firm's marginal cost curve is declining.
E) are represented by the declining portion of the average fixed cost curve.

Correct Answer: