If a Firm Is Experiencing Diseconomies of Scale, Then It

question 103

Multiple Choice

If a firm is experiencing diseconomies of scale, then it must be operating at a point where its:

• A) average revenue curve is upward sloping
• B) long- run average total cost curve is upward sloping
• C) long- run average total cost curve is downward sloping
• D) marginal cost curve is downward sloping

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Definitions:

Diminishing Marginal Returns

A principle in economics where each additional unit of input results in a smaller increase in output than the previous unit, at a certain point.

Marginal Cost

The additional cost incurred in producing one more unit of a product, emphasizing the concept of optimizing production levels.

Average Total Cost

The total cost per unit of output, calculated by dividing the total cost of production by the total quantity produced.

Average Variable Cost

The variable cost (e.g., labor, materials) per unit of output, calculated by dividing total variable costs by the number of units produced.