Suppose that a firm's long-run average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. For this range of output, the firm is experiencing
A)economies of scale.
B)constant returns to scale.
C)diseconomies of scale.
D)specialization.

Question

Quizplus · Accepted Answer

The firm is experiencing diseconomies of scale because as it increases production from 10,000 to 11,000 tables, its average total cost per table increases from $300 to $325. This suggests that the firm is becoming less efficient as it produces more, leading to an increase in cost per unit.

Suppose That a Firm's Long-Run Average Total Costs of Producing