A decrease in the long-run average total cost as output increases is due to: a. declining...
Question:
A decrease in the long-run average total cost as output increases is due to:
a. declining average fixed costs.
b. the law of diminishing returns.
c. economies of scale.
d. externalities.
Units of Output:
In economics, the output units depict the firms' final products of the production process. These outputs are then brought and sold in the market. The cost of production and the total demand for the output determines the total units of output produced.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerThe correct option is c.) economies of scale.
Economies of scale signify when the average total cost of production reduces with the expansion of the...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:

from
Chapter 3 / Lesson 41Explore the principle of economies of scale and delve into several real-world examples. Learn the formula for determining economies of scale as well as their types, benefits, inputs and the factors that influence them. Discern the limits of economies of scale and find out the difference between economies of scale and diseconomies of scale.
Related to this Question
- When a firm's long-run average total cost falls as its output increases, the firm is experiencing: A) constant returns to scale. B) diseconomies of scale. C) decreasing cost of marginal returns. D) decreasing marginal returns. E) economies of scale.
- Under decreasing returns to scale, average cost (increases/decreases) as quantity produced increases. Over this range of output, the marginal cost curve is (higher than/lower than/equivalent to) the average cost curve.
- Average total cost a. increases as output increases. b. decreases as output increases. c. increases if marginal cost is increasing. d. increases if marginal cost is greater than average total cost. e. Both c and d.
- Decreasing returns to scale means that ___________ as ______________. A) short-run marginal costs rises, output rises. B) long-run marginal cost rises, output rises. C) short-run average cost rises, output rises. D) long-run average cost rises, output ris
- Ceteris paribus, if all inputs increase by 10 percent and output increases by less than 10 percent, then: a) average total cost is decreasing. b) average total cost is increasing. c) the LRAC curve is horizontal. d) there are economies of scale. e) there
- When a firm can increase its output with a less than proportional increase in total costs, which of the following is true? 1) The firm has economies of scale. 2) The firm's average cost is decreasing with output. 3) The firm's marginal cost is less tha
- When a firm can increase its output with a less than proportional increase in total costs, which of the following is true? 1) The firm has economies of scale. 2) The firm's average cost is decreasing with output. 3) The firm's marginal cost is less th
- The marginal cost curve slopes downward at low outputs because of _____. The marginal cost curve eventually slopes upward because of _____. A) the law of diminishing returns; increasing average fixed cost. B) the law of diminishing returns; greater specia
- Which cost always increases as output increases? A. Total cost B. Average total cost C. Marginal cost D. Average fixed cost
- Diminishing marginal returns implies: a) increasing marginal costs. b) decreasing marginal costs. c) decreasing average fixed costs. d) decreasing average variable costs.
- Marginal cost eventually increases as output increases due to the effect of [{Blank}]. a. economies of scale, b. increasing average cost, c. increasing total cost, d. diminishing marginal product of inputs, e. constant fixed cost.
- In the short run, if the average total cost is increasing as output rises, then: A) total fixed costs must be increasing. B) average fixed costs must be increasing. C) average variable cost must be increasing. D) marginal cost must be below average total
- Average fixed cost a. increases as output increases. b. decreases as output increases. c. increases if marginal cost is increasing. d. increases if marginal cost is greater than average fixed cost.
- If average costs and marginal costs are constant then: (a) average variable costs must be increasing. (b) there are decreasing returns to scale. (c) there are no fixed costs of production. (d) None of the above.
- If there is a decrease in output then will the difference between the average total cost and average variable cost is decreased?
- When marginal cost is greater than average total cost, A. average total cost must be increasing with output. B. average variable cost must be decreasing with output. C. average fixed cost must be increasing with output. D. marginal cost must be increas
- Diminishing marginal returns implies: a. decreasing average variable costs. b. decreasing marginal costs. c. increasing marginal costs. d. decreasing average fixed costs. e. none of the above
- An increase in output would result in no change in long-run average costs when there are: A. constant returns to scale B. diminishing marginal product C. diminishing returns to scale. D. economies of
- When diminishing marginal returns set in, a. average product is increasing. b. average variable cost is decreasing. c. average cost is decreasing. d. none of above.
- A decrease in the long-run average costs resulting from increasing output is referred to as: a. diseconomies of scale. b. economies of scale. c. constant return to scale. d. a scale invariant process.
- Economies of scale exist when: a) Total cost decreases as output increases. b) Long-run average cost decreases as output increases. c) Marginal cost decreases as output increases. d) Fixed cost decreases as output increases.
- The average cost is U-shaped because an increase in output increases the returns and reduces the total cost - Clarify the statement.
- As a firm increases its output, which of the following costs should decrease? A. Average total cost B. Average variable cost C. Marginal cost D. Average fixed cost
- If, in the short run, there are increasing returns to labor, then: A. marginal cost will fall as production increases (until diminishing returns occur) B. average variable cost will increase C. average total cost will increase D. none of the above
- If marginal cost is less than average cost, at current levels of production, a. average cost is increasing with output. b. average cost is decreasing with output. c. total cost is decreasing. d. average cost is at a minimum.
- If the average total cost is decreasing as more and more units are produced, then the marginal cost must be A. rising. B. constant. C. negative. D. below average total cost. E. equal to average total cost.
- When marginal costs are increasing: a. marginal costs are always greater than average costs. b. a firm is experiencing diminishing returns. c. average cost is always increasing. d. average cost is alw
- When long-run average costs decrease as output increases, there are A. economies of scale. B. constant marginal costs. C. diseconomies of scale. D. constant returns to scale.
- If the productivity of variable factors is decreasing in the short-run: a. Marginal cost must increase as output increases. b. Average cost must decrease as output increases. c. Average cost must increase as output increases. d. Marginal cost must be decr
- When price is greater than average variable cost but less than average total cost at the profit-maximizing level of output, a firm should: a. continue to produce the level of output at which marginal revenue equals marginal cost. b. shutdown to minimize i
- If the average total cost is decreasing as more and more units are produced, then the marginal cost must be A) rising. B) constant. C) negative. D) below the average total cost. E) equal to the average total cost.
- The decreasing portion of a firm's long-run average cost curve is attributable to a. increasing marginal cost. b. economies of scale. c. diseconomies of scale. d. constant returns to scale.
- If marginal cost is less than average cost at all output levels A. marginal cost must be falling. B. average cost must be falling. C. average cost must be rising. D. none of these.
- When long-run average total cost decrease as output increases, the firm is experiencing: a) variable costs only. b) constant returns to scale. c) diseconomies of scale. d) economies of scale.
- The downward-sloping segment of long-run average cost curve corresponds to a. diseconomies of scale. b. both economies and diseconomies of scale. c. the decrease in average variable cost. d. economies of scale.
- The downward-sloping segment of the long-run average cost curve corresponds to a. diseconomies of scale. b. both economies and diseconomies of scale. c. the decrease in average variable cost. d. economies of scale.
- If a firm's average total costs decrease as it increases its scale of production, the firm is experiencing: A. increasing returns from specialization. B. diminishing marginal product. C. diseconomies of scale. D. economies of scale. E. constant returns to
- At the level of output where marginal cost equals average variable cost: a. average total cost is minimum b. average variable cost is decreasing c. average variable cost is increasing d. average total cost is decreasing
- If average total cost is decreasing as more and more units are produced, then marginal cost must be A) rising B) constant C) negative D) below average total cost E) equal to average total cost
- If average variable costs are increasing while average total costs are decreasing, then A) marginal cost must lie between average variable and average total costs. B) marginal cost must equal averag
- If marginal cost less than average total cost, for higher output level _____. a. both average total cost and average variable cost must be falling. b. average total cost must be falling but average variable cost may be rising or falling. c. marginal cost
- If the marginal cost of production is smaller than the average total cost, does this tell you whether the average total cost is increasing or decreasing? What if the marginal cost is equal to the aver
- 1. The output range over which average product increases is the output range over which A. average variable cost decreases B. average total cost decreases C. marginal cost increases D. marginal cos
- Consider a firm's short-run cost curves. If average total cost is increasing as output rises, then: A) total fixed costs must be increasing B) average fixed costs must be increasing. C) average variable cost must be increasing. D) marginal cost must be
- If marginal cost is less than average total cost, for a higher output level: a. both average total cost and average variable cost must be falling. b. average total cost must be falling, but the average variable cost may be rising, or falling. c. marginal
- Economies of scale a. occur when income increases more than the increase in output. b. are represented by the declining portion of the average fixed cost curve. c. are represented by the declining portion of the long-run average total cost curve. d. sugge
- The range of output over which a firm's average variable cost is decreasing is the same as the range over which its A. marginal cost is increasing. B. average product is increasing. C. average product is decreasing. D. average fixed cost is decreasing.
- When a firm is experiencing economies of scale, long-run: a. average total cost is minimized, b. average total cost is greater than long-run marginal cost, c. average total cost is less than long-run marginal cost, d. marginal cost is minimized.
- If the marginal cost of production exceeds the average cost of production, then: 1) the marginal cost is falling. 2) the marginal cost is rising. 3) the average cost is falling. 4) the average cost is rising. 5) the firm should shut down.
- If the total variable cost curve is rising: a. the marginal cost is decreasing. b. the marginal cost is increasing. c. the average fixed cost is constant. d. the average fixed cost is increasing.
- Decreasing returns to a variable factor implies: a. Decreasing average variable cost. b. Increasing average variable cost. c. Increasing average fixed cost. d. Constant average total cost. e. Constant average variable cost.
- When the marginal cost of another unit of output is less than the current value of average total cost, producing another unit of output: A. Increases average total cost B. Decreases average total cost C. Has no effect on average total cost D. Increase
- "In equilibrium, a monopolistic competitor will produce an output level that is less than the level that would minimize its average total costs." This is a statement of the a. law of diminishing returns. b. law of second best. c. law of variable proportio
- An increase in fixed costs will lower a firm's A. total cost B. output C. prices D. profit
- If the average variable cost curve is above the marginal cost curve, then: a) marginal costs must be decreasing. b) average variable costs must be increasing. c) marginal costs must be increasing. d) marginal costs can be either increasing or decreasing.
- If marginal cost is rising with increasing output, average cost must also be rising?
- Economies of scale refer to A. the fact that in the long run, fixed costs remain constant as output increases. B. the range of output over which the long-run average cost falls as output increases. C. the point at which marginal cost equals average cost.
- The decrease(s) as the firm increases production. a. explicit costs b. implicit costs c. fixed cost d. variable cost e. average fixed cost f. average total cost g. marginal cost h. diminishing marginal product of labor i. increasing marginal product of la
- Diseconomies of scale occur when: A) average total cost increases as output increases. B) average total cost declines as output increases. C) average fixed cost declines as output increases. D) average fixed cost increases as output increases.
- When the output elasticity of total cost is less than one, _____. A. Marginal cost is less than average cost, and average cost decreases as quantity increases. B. Marginal cost is less than average cost, and average cost increases as quantity increases.
- When price is greater than average variable cost but less than average total cost at the profit-maximizing level of output, a firm should _____. a. continue to produce the level of output at which marginal revenue equals marginal cost b. shutdown to minim
- The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced increases because: a. average fixed cost decreases as output increases. b. average total cost decreases as output increases. c. the firm experiences g
- If,at the current level of output, a firm's average cost is greater than its marginal cost, then: A) an increase in output must raise its average cost still further above marginal cost. B)a reductio
- When long-run average costs increase as output increases, there are A. diseconomies of scale. B. constant returns to scale. C. constant marginal costs. D. economies of scale.
- When an increase in a firm's output of a good or service brings a decrease in the average total cost of producing it, the firm is experiencing A. diseconomies of scale. B. economies of scale. C. economies of scope. D. diminishing returns
- Average cost curves initially fall: a. due to declining average fixed costs b. due to rising average fixed costs c. due to rising fixed costs d. due to rising marginal costs
- When marginal cost exceeds average total cost, A. average fixed cost must be rising. B. average total cost must be rising. C. average total cost must be falling. D. marginal cost must be falling.
- When marginal cost exceeds the average total cost: a. The average fixed cost must be rising, b. The average total cost must be rising, c. The average total cost must be falling, d. The marginal cost must be falling.
- The situation in which average costs are decreasing as output increases is known as: a) diseconomies of scale. b) constant returns to scale. c) economies of scale. d) marginal returns to scale.
- If average variable costs are increasing while average total costs are decreasing, then A) marginal cost must lie between average variable and average total costs. B) marginal cost must equal average variable cost. C) marginal cost must equal the avera
- If average total cost is greater than average variable cost is greater than price, a profit-maximizing firm in a perfectly competitive market should: a. shut down in the short run. b. increase its output level to minimize its loss. c. none of these
- Average total cost is increasing whenever: A. total cost is increasing B. marginal cost is greater than average total cost C. marginal cost is increasing D. marginal cost is less than average total cost
- When production increases over the short run: a) Average Fixed cost will remain the same. b) Average Variable cost will increase faster than Average Total cost. c) Average Variable Cost will eventually increase faster than Marginal cost. d) Marginal C
- In short-run, if the price falls, the firm will respond by A. liquidating all of its assets and shutting down. B. producing at the output level where average variable cost is equal to marginal revenue. C. reducing output along its marginal cost curve as
- If average variable costs are increasing while average total costs are decreasing, then A) marginal cost must lie between average variable and average total costs. B) marginal cost must equal average variable cost. C) marginal cost must equal average tota
- Given that the average cost is 5 and the marginal cost is 7, the average cost: a. must decline b. must increase c. is at maximum d. is at minimum e. it is not possible to determine which is correct wi
- Economies of scale occur: A. when a firm's long-run average costs decrease with output. B. when a firm's long-run average costs increase with output. C. when the marginal cost of production decreases with output. D. when the marginal product of labor i
- If marginal cost is below average variable cost: A. both the average total cost and average variable cost are decreasing. B. average total cost is increasing but the average variable cost is decreasing. C. both the average total cost and average variab
- If short-run marginal cost is U-shaped, then a. total cost increases at an increasing rate and then increases at a decreasing rate. b. total variable cost increases at a decreasing rate and then increases at an increasing rate. c. total variable cost must
- If the marginal cost is $50 and the average total cost is $75, we can be sure that: a. marginal cost is rising. b. average total cost is rising. c. marginal cost is falling. d. average total cost is falling.
- If price falls below minimum average variable cost, the best a firm can do is: A) stop production and incur a loss equal to total fixed cost. B) increase production and incur a loss equal to total fixed cost. C) stay at the same production level and in
- Tip: draw a graph.) In the range of output levels where the marginal cost curve is above an average cost curve (ATC or AVC), the average cost is: - increasing as output increases. - none of other answers. - declining as output increases. - does not cha
- In a competitive industry, the market price of output is $24. A firm is producing that level of output at which the average total cost is $30, the marginal cost is $25, and the average fixed cost is $5. In order to maximize profit (or minimize losses), th
- If the minimum points of all possible short-run average total cost curves become successively lower as quantity of output increases, a. the firm should try to produce less output. b. total fixed costs are constant along the LRAC curve. c. there are eco
- 14. Average variable cost may be either increasing or decreasing when a) marginal cost is decreasing b) marginal product is increasing c) average fixed cost is decreasing d) average total cost is inc
- If a profit-maximizing firm finds that price exceeds average variable cost and marginal cost is greater than marginal revenue, it should: a. reduce output, but continue producing in the short run. b.
- Diminishing marginal returns to the variable inputs causes the total cost curve to: a) get steeper as output increases. b) have a negative slop. c) get flatter as output increase. d) be horizontal.
- If the marginal cost curve is below the average variable cost curve, then A. average variable costs are increasing. B. average variable costs are decreasing. C. marginal cost must be decreasing. D. average variable costs could either be increasing or decr
- Economies of scale imply that within some range, a firm can increase the size of its operation and ______. a. fixed costs will decrease. b. the average total costs will increase. c. the average total cost will decrease. d. total costs will decrease.
- When marginal cost curve is below an average cost curve, average cost is A. increasing with output. B. declining with output. C. not varying with output. D. none of the statements associated with
- The range over which average variable cost is decreasing is the same as the range over which: A) average product is decreasing. B) average product is increasing C) average fixed cost is decreasing D) marginal cost is increasing E) marginal product is
- Short-run profits are maximized at the rate of output where: a. average total costs are minimized. b. total revenue is maximized. c. marginal revenue is equal to marginal cost. d. marginal revenue is zero.
- If a firm's long-run average total costs increase as it increases its scale of production, the firm is experiencing: a. increasing returns from specialization. b. diseconomies of scale. c. economies of scale. d. constant returns to scale. e. diminish
- In the short run, if a firm produces the level of output at which marginal revenue is equal to marginal cost but price is less than average total cost, the firm will: a. Always shut down production, b. Expand output to lower its average fixed cost, c. C
- If the minimum points of all possible short-run average total cost curves become successively lower as the quantity of output increases: a. the firm should try to produce less output. b. total fixed costs are constant along the LRAC curve. c. there are
- If the variable costs of a profit-maximizing pure monopolist decline, the firm should: a. raise both output and price. b. produce more output and charge a lower price. c. produce more output and charge a higher price. d. reduce both output and price.
- Other things being equal, when average productivity falls: a. average fixed cost must rise b. marginal cost must rise c. average total cost must rise d. average variable cost must rise.
- When a firm is experiencing decreasing marginal costs, it implies a. There are increasing average costs b. There is constant marginal productivity c. There are increasing marginal productivity d. The
- In the short run, if the marginal product of labor is decreasing, then: a. Marginal cost must be increasing, b. The marginal revenue of the firm must be decreasing, c. Average total cost must be increasing, d. Average variable cost must be decreasing,
- Which always increase(s) as output increases? a) Marginal cost only. b) Fixed cost only. c) Total Cost only. d) Variable Cost only. e) Total cost and Variable cost.