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

-When a firm is experiencing economies of scale, it will:
A)underuse a larger plant size than is indicated by short-run efficiency concerns.
B)underuse a smaller plant than is indicated by short-run efficiency concerns.
C)overuse a larger plant size than is indicated by short-run efficiency concerns.
D)overuse a smaller plant size than is indicated by short-run efficiency concerns.
E)produce at the minimum short-run and long-run average costs.

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 8.3
 
-When a firm is experiencing economies of scale, it will:
A)underuse a larger plant size than is indicated by short-run efficiency concerns. 
B)underuse a smaller plant than is indicated by short-run efficiency concerns. 
C)overuse a larger plant size than is indicated by short-run efficiency concerns. 
D)overuse a smaller plant size than is indicated by short-run efficiency concerns. 
E)produce at the minimum short-run and long-run average costs.

Quizplus · Accepted Answer

When a firm is experiencing economies of scale, it will underuse a larger plant size than is indicated by short-run efficiency concerns. This is because the firm can produce more output at a lower cost with a larger plant size.

The Figure Given Below Shows Three Short Run Average Total