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

Accounting Dec 07, 2020

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.

Expert Solution

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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