Assume that you observe the long-run average cost curve of ACME Bookstores, a national chain.Starting from the point on the curve where output is zero and moving to the right, which of the following lists the behavior of long-run average costs in the correct sequence (that is, which will be observed first, second, etc.)?
A)minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale
B)economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale
C)constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale
D)economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale

Question

Quizplus · Accepted Answer

The minimum efficient scale occurs at the point where economies of scale stop and before diseconomies of scale begin. Therefore, it would come after economies of scale and before diseconomies of scale. This sequence is captured only in option D.

Assume That You Observe the Long-Run Average Cost Curve of ACME