In the long run, when marginal cost is above average total cost, the average total cost curve exhibits
A)economies of scale.
B)diseconomies of scale.
C)constant returns to scale.
D)efficient scale.

Question

Quizplus · Accepted Answer

When marginal cost is above average total cost, it means that each additional unit produced is increasing the cost more than the average cost of producing all units up to that point. This indicates that the firm is experiencing diminishing returns to scale and is likely operating beyond its efficient scale. Therefore, the average total cost curve exhibits diseconomies of scale.

In the Long Run, When Marginal Cost Is Above Average