Economies of scale occurs when
long-run average cost decreases as output increases.
long-run average cost decreases as output decreases.
long-run average cost increases as output increases.
marginal cost increases as output increases.
marginal cost decreases as output decreases.
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A) A firm experiences economies of scale if its average total cost ________
(increases/decreases/remains constant as its output increases)
B) A firm experiences diseconomies of scale if its average total cost ________
Practice Long run
The diagram below shows the LRAC for a firm. The SRATC curves 1-5 refer to different plant sizes.
In the long run, the lowest cost level of output achievable by this firm is at point