The Figure Below Shows a Family of Cost Curves for a Firm

question 27

Multiple Choice

The figure below shows a family of cost curves for a firm. The subscripts 1, 2, and 3 for the SRATC curves refer to different plant sizes. FIGURE 8- 3
-Refer to Figure 8- 3. Suppose this firm is producing output level Q3 with plant size 2. Now suppose this firm changes to plant size 3 and is producing output level Q5. We can say that

• A) output has increased exactly in proportion to the increase in inputs.
• B) output has increased less than in proportion to the increase in inputs.
• C) output has increased more than in proportion to the increase in inputs.
• D) this firm has experienced economies of scale.
• E) the firm is then operating with the optimal plant size.

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