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Homework answers / question archive / When a firm's long-run average total cost falls as its output increases, the firm is experiencing: A) constant returns to scale

When a firm's long-run average total cost falls as its output increases, the firm is experiencing: A) constant returns to scale

Accounting

When a firm's long-run average total cost falls as its output increases, the firm is experiencing:

A) constant returns to scale.

B) diseconomies of scale.

C) decreasing cost of marginal returns.

D) decreasing marginal returns.

E) economies of scale.

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The correct answer is E) economies of scale.

  • This statement accurately depicts the phenomenon of economies of scale. If the firm's long-run average total cost were to increase as its output increases, this would reflect diseconomies of scale.

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