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 8.3 -Refer to the Figure 8.3. In the long run, an increase in production from Q₁ to Q₃ would: A)increase average cost by C₄ - C₁. B)increase average cost by C₃ - C₁. C)increase average cost by C₃ - C₂. D)decrease average cost by C₃ - C₁. E)decrease average cost by C₃ - C₂.

Question

Quizplus · Accepted Answer

In the long run, firms experience economies of scale, meaning as production increases, the average cost of producing each unit decreases. Therefore, an increase in production would decrease average cost, not increase it.

The Figure Given Below Shows Three Short Run Average Total