Figure 11-11

Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 11-11.For output rates greater than 20,000 picture frames per month,

Question

Figure 11-11
  
Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 11-11.For output rates greater than 20,000 picture frames per month,

Quizplus · Accepted Answer

The graph shows that for output rates greater than 20,000 picture frames per month, the long-run average cost curve starts to slope upwards, indicating diseconomies of scale. This means that as the firm expands production beyond a certain point, the average cost of production increases. Therefore, choice B is the best answer. Option A is incorrect, as there is no information to suggest that the firm will not make a profit. Choice C is also incorrect, as there is no indication of diminishing returns in the figure. Option D is incorrect, as the figure shows that the short-run average total cost curves do not intersect with the long-run average total cost curve beyond a certain point.

Figure 11-11 Figure 11-11 Illustrates the Long-Run Average Cost Curve for a Average