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The long-run average cost curve will be upward sloping when the firm is experiencing:

A. Diseconomies of scale.

B. Economies of scale.

C. Constant returns to scale.

D. Diminishing returns.

 

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Mahe Alam
Mahe AlamLv10
10 Sep 2020
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Related questions

If the total cost curve gets steeper as output increases, the firm is experiencing
 
A. Diseconomies of scale.
B. Economies of scale.
C. Diminishing marginal product.
D. Increasing marginal product.

a) Explain why earning zero economic profit is not as bad as it sounds. b) What is the difference between the law of diminishing marginal returns and diseconomies of scale? Briefly explain what causes diseconomies of scale. c) Why is the Average Total Cost curve U-shaped? d) Explain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal costs are rising. e) What economies of scale and economies of scope exist in (a) oil refining; (b) banking?

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?
 
(i) Diminishing marginal returns that apply only in the short run, when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale which applies in the long run, when all factors are variable, explains why average cost increases.
(ii) Diminishing marginal returns which apply only in the short run, when at least one factor is fixed, explains why average variable cost increases, while diseconomies of scale which applies in the long run, when all factors are variable, explains why average total cost increases.
(iii) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale apply in the long run when all factors are variable.
(iv) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale apply in the long run when all factors are variable.

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