Question

Which average cost function below represents economies of scale? Q is the output. a. 2+4/Q b....

Which average cost function below represents economies of scale? Q is the output.

a. 2+4/Q

b. Q2

c. 5Q

d. 5+3Q

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Homework Answers

Answer #1

The diseconomies of scale exist when the long-run Average total cost continues to increase with the increase in the output level.

The economies of scale exist when the long-run Average total cost continues to decrease with the increase in the output level.

Hence option a is the correct answer.

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