When a firm experiences continually declining average total costs,
A)the firm is a price taker.
B)society is better served by having one firm supply the product.
C)the firm will earn higher profits than if average total costs are increasing.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

If a firm experiences continually declining average total costs, it indicates increasing returns to scale. This means that as the output of the firm increases, its costs per unit of output decrease. This can result in the firm becoming a dominant player in the market and gaining a larger market share. However, if the firm becomes too dominant, it can lead to a monopoly, which may not be beneficial for society. Therefore, it may be better for society to have multiple firms supplying the product to ensure competition and lower prices for consumers.

When a Firm Experiences Continually Declining Average Total Costs