Question

The long-run average total cost curve: will rise if diminishing returns are encountered. will fall if diminishing returns are encountered. will rise if economies of scale are incurred. is based on the assumption that all resources are variable.

Answer 1

The long-run average total cost curve: will rise if diminishing returns are encountered. will fall if diminishing returns are encountered. will rise if economies of scale are incurred. is based on the assumption that all resources are variable. The law of diminishing returns implies that marginal cost will rise as output increases

What is cost curve?

A cost curve in economics is a graph that shows the production costs as a function of the overall quantity produced. A cost curve is produced in a free market economy by productively efficient enterprises optimizing their production process by minimizing cost at each feasible level of production. Cost curves are used by profit-maximizing businesses to determine output levels. In addition to total and average cost curves, there are also marginal ("for each additional unit") cost curves, which are equal to the difference between total and average cost curves, and variable cost curves. Some apply in the near run while others do so in the long run.

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