When a Firm Increases Its Plant Size in the Long

question 85

Multiple Choice

When a firm increases its plant size in the long run and its per-unit costs fall, this is called

• A) diminishing returns and is shown by the downward-sloping portion of the MP curve (or the upward-sloping portion of the MC curve).
• B) constant returns to scale and is shown by the flat portion of the LRATC curve.
• C) diseconomies of scale and is shown by the upward-sloping portion of the LRATC curve.
• D) economies of scale and is shown by the downward-sloping portion of the LRATC curve.

---

Definitions:

Groundwater

Soil water and water in aquifers.

Aquifers

Underground layers of water-bearing permeable rock, rock fractures, or unconsolidated materials from which groundwater can be extracted using a water well.

Lakes

Large bodies of water surrounded by land, freshwater or sometimes saline, that are inland and not part of the ocean.

Rivers

Large natural streams of water flowing in channels to the sea, a lake, or another river.