When the firm increases output and the costs rise disproportionately slower, then the longminusrun average cost curve is _____
___ and the firm is experiencing ________.
A. downward sloping; economies of scale
B. upward sloping; diseconomies of scale
C. downward sloping; constant returns to scale
D. horizontal; constant returns to scale
A. downward sloping; economies of scale
B. upward sloping; diseconomies of scale
C. downward sloping; constant returns to scale
D. horizontal; constant returns to scale
1 answer:
Answer:
A. Downward sloping; economies of scale
Explanation:
As the costs rise slower than quantity produced, the cost for each additional unit produced (marginal cost) is decreasing. That is when the Average Cost curve is downward sloping.
At that point the more products are made (scales of production) the lower unit cost becomes (more economic), which means economies of scale.
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Explanation:
It is given that in the market there are four equal-sized firms that produce similar products. The market is saturated such that 10% industry-wide price rise would lead to 18% decline in units sold by all firms in the industry. Going further, there is a proposed legislation that imposes a tariff on a key input used by the industry, which on realization would result in the increase in marginal cost by $2.
This means that the market elasticity of demand is:
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