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Costs and economies of scale

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Question 17

The diagram below shows a firm's Short-Run Average Cost (SRACSRACSRAC) curves and its Long-Run Average Cost (LRACLRACLRAC) 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 LRACLRACLRAC curve represents the firm experiencing economies of scale.

A movement along SRAC1SRAC_1SRAC1​ 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 LRACLRACLRAC 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.

Costs and economies of scale Questions

  1. A Level
  2. /Economics
  3. /Costs and economies of scale