The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm. Figure 7.3
- Which of the following would account for the shape of the long-run average-total-cost curve in Figure 7.3?
A)Low worker morale
B)Low productivity
C)Administration overhead
D)Specialization of labor
E)Managerial problems

Question

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm. Figure 7.3 
- Which of the following would account for the shape of the long-run average-total-cost curve in Figure 7.3?
A)Low worker morale 
B)Low productivity 
C)Administration overhead 
D)Specialization of labor 
E)Managerial problems

Quizplus · Accepted Answer

The decreasing shape of the LRATC curve indicates that the firm is experiencing economies of scale. This could be due to the specialization of labor, where workers become more efficient in their specialized tasks, leading to higher productivity and lower costs. Therefore, option D is the best choice. The other options listed are unlikely to affect the shape of the LRATC curve.

The Figure Given Below Shows Three Short Run Average Total