Which of the following is TRUE if a firm has indivisible inputs?
A) The long-run average cost curve is downward sloping at lower levels of output.
B) The long-run fixed cost curve is downward sloping at lower levels of output.
C) The long-run total cost curve is downward sloping at lower levels of output.
D) The long-run marginal cost curve is downward sloping at lower levels of output.

Question

Quizplus · Accepted Answer

When a firm has indivisible inputs, such as a large piece of equipment or a factory, it may experience economies of scale. This means that as the firm produces more output, the average cost of production decreases. This is reflected by a downward sloping long-run average cost curve. However, this does not necessarily mean that the other cost curves (long-run fixed cost, total cost, marginal cost) will also be downward sloping.

Which of the Following Is TRUE If a Firm Has