The Portion of the Long-Run Average Cost Curve in Which

question 68

Multiple Choice

The portion of the long-run average cost curve in which economies of scale are experienced shows that as output increases,the

• A) average total cost decreases.
• B) average total cost increases.
• C) marginal cost increases.
• D) marginal cost decreases.
• E) average variable cost is constant and the average fixed cost decreases.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor.

Fixed Costs

Expenses that do not change in the short term despite variations in production levels or sales volumes, such as rent, salaries, or insurance.

Total Revenue

The overall revenue that originates from a company's core operations, including the sale of its products or services.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, which decreases as production increases.