Which of the following statements is TRUE?
A) If a firm is experiencing economies of scale, diminishing marginal product has not set in yet.
B) No firm would ever operate at a level of output for which it experiences diseconomies of scale.
C) A firm can experience diminishing marginal product and economies of scale at the same time.
D) Diseconomies of scale is a short-run concept, while economies of scale is a long-run concept.

Question

Quizplus · Accepted Answer

A firm can experience diminishing marginal product at higher levels of output, while still benefiting from economies of scale at lower levels of output due to specialization and spreading fixed costs over more units produced. Therefore, statement A is false. Statement B is also false, as a firm may continue to produce at higher levels even if it experiences diseconomies of scale, as long as it is still generating profit. Finally, statement D is false, as both concepts apply to the long run but economies of scale refer to decreasing long-run average costs as output increases while diseconomies of scale refer to increasing long-run average costs as output increases.

Which of the Following Statements Is TRUE