Refer to the information provided in Figure 1.5 below to answer the questions that follow. Figure 1.5
-Refer to Figure 1.5. In many industries, as firms produce additional units, average costs of production decline as the firm produces an additional unit, but average costs declines by a smaller and smaller amount as production continues to increase. If output is graphed on the horizontal axis and average costs are graphed on the vertical axis, the relationship between average costs and output would be like which of the following panels?
A) A
B) B
C) C
D) D

Question

Refer to the information provided in Figure 1.5 below to answer the questions that follow.  Figure 1.5
-Refer to Figure 1.5. In many industries, as firms produce additional units, average costs of production decline as the firm produces an additional unit, but average costs declines by a smaller and smaller amount as production continues to increase. If output is graphed on the horizontal axis and average costs are graphed on the vertical axis, the relationship between average costs and output would be like which of the following panels?
A) A 
B) B 
C) C 
D) D

Quizplus · Accepted Answer

The relationship described is characteristic of economies of scale, where average costs decrease as output increases, but at a decreasing rate. This typically results in a downward-sloping curve that flattens out, as shown in panel C.

Refer to the Information Provided in Figure 1