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Long-run average total cost curves are often U-shaped: a
Long-run average total cost curves are often U-shaped:
a. For the same reasons that average total cost curves are often U-shaped,
b. Because of constant returns to scale,
c. Because of increasing coordination problems at low levels of production and increasing specialization of workers at high levels of production,
d. Because of the increasing specialization of workers at low levels of production and increasing coordination problems at high levels of production.
Expert Solution
d. Because of the increasing specialization of workers at low levels of production and increasing coordination problems at high levels of production.
The long-run Average cost curve is U shaped implying that as the output level increase initially the AC falls( economies of scale ), then after some time as output rises instead of falling AC rises. (Dis-economies of scale). At low levels of production, coordination is quite easy, & the degree of Specialization is quite high. Coordination problems become typical at higher production levels, with a falling degree of Specialization.
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