Question

What term describes the long run cost situation where the quantity of output rises, but the...

What term describes the long run cost situation where the quantity of output rises, but the average cost of production falls?

a. Increasing Marginal Costs

b. Economies of Scale

c. Diseconomies of Scale

d. Diminishing Marginal Returns

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Homework Answers

Answer #1

Option B.

  • The term that describes the long run cost situation where the quantity of output rises, but the average cost of production falls is the Economies of scale.
  • Economies of scale refers to the cost benefit that occurs when a firm is able to increase its production in such a way that it increases the number of units of a good produced.
  • This will cause the cost of production to distribute among all the units rather than the cost per unit. This will eventually lead to a fall in the average cost of production.
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