If the average total cost of producing 20 sweaters an hour falls when the firm doubles all its inputs, then the
A) firm moves along its short- run average total cost curve.
B) short- run average total cost curve shifts upward because all inputs have increased.
C) long- run average cost curve shifts downward.
D) firm experiences economies of scale.

Question

Quizplus · Accepted Answer

When a firm doubles all its inputs and the average total cost of producing an output falls, it is experiencing economies of scale. This means that as the scale of production increases, the cost per unit decreases, which is not related to moving along the short-run average total cost curve or shifts in the curve itself but rather indicates efficiency gains in the long run.

If the Average Total Cost of Producing 20 Sweaters an Hour