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

-Which of the following statements is true?
A)When long-run average total costs are increasing, the firm enjoys economies of scale.
B)Most industries exhibit long-run average costs that are shaped like an upside-down U.
C)Constant returns to scale occur when the short-run average-total-cost curve is horizontal.
D)When long-run average total costs are increasing, the firm has diseconomies of scale.
E)Constant returns to scale are never present in the real world.

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
 
-Which of the following statements is true?
A)When long-run average total costs are increasing, the firm enjoys economies of scale. 
B)Most industries exhibit long-run average costs that are shaped like an upside-down U. 
C)Constant returns to scale occur when the short-run average-total-cost curve is horizontal. 
D)When long-run average total costs are increasing, the firm has diseconomies of scale. 
E)Constant returns to scale are never present in the real world.

Quizplus · Accepted Answer

When the LRATC curve is increasing, it means that the firm is experiencing diseconomies of scale, as it is becoming less efficient as it grows larger in the long run. Therefore, option D is the correct answer. Options A, B, C, and E are incorrect because they do not accurately describe the relationship between short-run and long-run costs or the shape of the LRATC curve.

The Figure Given Below Shows Three Short Run Average Total