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Question
Microeconomics
Posted 2 months ago

Dineo Enterprises is experiencing economies of scale.
Which of the following must be true?

Choose 1 answer:
(A) This firm's long-run average total cost curve is flat.
(B) Proportionate increases in inputs result in proportionate increases in outputs.
(c) Dineo Enterprises' economic profits will decrease if it increases output.
(D) All of the firm's costs are implicit.
(E) Long-run average total cost decreases if Dineo Enterprises increases output.
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Answer from Sia
Posted 2 months ago
Solution
a
Economies of Scale: Economies of scale occur when increasing the scale of production leads to a lower cost per unit of output
b
Long-Run Average Total Cost (LRATC): When a firm experiences economies of scale, its long-run average total cost decreases as output increases
c
Correct Answer: The correct statement that must be true when Dineo Enterprises is experiencing economies of scale is that the long-run average total cost decreases if Dineo Enterprises increases output
Answer
(E) Long-run average total cost decreases if Dineo Enterprises increases output.
Key Concept
Economies of Scale
Explanation
When a firm experiences economies of scale, it means that as the firm increases its production, the average cost per unit of output decreases. This is reflected in a downward-sloping long-run average total cost curve.

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