Business objectives

The diagram below shows a firm's Short-Run Average Cost ( $S R A C$ ) curves and its Long-Run Average Cost ( $L R A C$ ) curve.

Cost Curves

Which of the following statements is correct regarding the firm's cost structure and scale of production?

A transition from point X to point Y along the $L R A C$ curve represents the firm experiencing economies of scale.

A movement along $SRAC_1$ from left to right down to point X represents the firm achieving long-run economies of scale.

A transition from point Y to point Z along the $L R A C$ curve represents the firm experiencing increasing returns to scale.

A transition from point X to point Y represents a short-run expansion where at least one factor of production remains fixed.

Business objectives Questions

The diagram below shows a firm's Short-Run Average Cost ( $S R A C$ ) curves and its Long-Run Average Cost ( $L R A C$ ) curve.

Cost Curves

Which of the following statements is correct regarding the firm's cost structure and scale of production?

A transition from point X to point Y along the $L R A C$ curve represents the firm experiencing economies of scale.

A movement along $SRAC_1$ from left to right down to point X represents the firm achieving long-run economies of scale.

A transition from point Y to point Z along the $L R A C$ curve represents the firm experiencing increasing returns to scale.

A transition from point X to point Y represents a short-run expansion where at least one factor of production remains fixed.