honeycfa

Which of the following most accurately describes economies of scale? Economies of scale:

A) increase at a decreasing rate.

B) occur when long-run unit costs fall as output increases.

C) are dependent on short-run average costs.

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Economies of scale occur when the percentage increase in output is greater than the percentage increase in the cost of all inputs. Economies of scale occur over the range where the long-run average cost curve slopes downward.

honeycfa

Which of the following most accurately describes the relationship between the slope of a firm’s long-run average total cost (LRATC) curve and scale economies?

Downward sloping segment of LRATC

Upward sloping segment of LRATC

A) Economies of scale Diseconomies of scale

B) Diseconomies of scale Economies of scale

C) Economies of scale Economies of scale

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The downward sloping segment of the LRATC cost curve covers the output range where economies of scale exist because per unit costs decrease as output increases. The upward sloping segment of the LRATC curve is where diseconomies of scale are present because costs rise as output increases.