If a Firm Increases Its Output and Its Average Cost

question 164

Multiple Choice

If a firm increases its output and its average cost decreases,the firm is experiencing which of the following?

• A) increasing marginal returns
• B) diseconomies of scale
• C) economies of scale
• D) random luck
• E) decreasing cost of marginal returns

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Definitions:

Functions of Prices

The role prices play in indicating the scarcity of goods and allocating resources in an economy.

Market System

An economic system whereby decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Invisible Hand

A term coined by Adam Smith to describe the self-regulating nature of the marketplace, where individuals working for their own gain unintentionally benefit society.

Wealth of Nations

A seminal book by Adam Smith that examines how nations achieve wealth and economic growth.