Suppose the long-run average cost curve is U-shaped.When LRAC is in the increasing stage,there exist:
A) economies of scope.
B) diseconomies of scope.
C) economies of scale.
D) diseconomies of scale.

Question

Quizplus · Accepted Answer

When LRAC is in the increasing stage, it means that the cost per unit is increasing as the firm produces more. This phenomenon occurs due to the occurrence of diseconomies of scale, which means that the firm is experiencing diminishing marginal returns as production increases. Therefore, the best choice is D - diseconomies of scale.

Suppose the Long-Run Average Cost Curve Is U-Shaped