Does anyone else think that the answer to this question is worded weird Which of the following most accurately describes economies of scale? Economies of scale: A) are dependent on short-run average costs. B) increase at a decreasing rate. C) occur when the long-run average cost curve is sloping upward. D) occur when long-run unit costs fall as output increases. The correct answer was D) occur when long-run unit costs fall as output increases. Shouldn’t it be when the long-run average cost falls as output increases and not long-run unit costs…
MC goes down but not AC
i meant long run average unit cost…isn’t that the idea behind economies of scale…that as output increases your long run average unit cost decreases.
decreasing in average cost is caused by decreasing in marginal cost your point is correct
If you look at a graph of marginal cost, average variable and average total costs, MC drops and drops, but then it starts going up crossing the average variable and average total cost at their minimum. It never crosses the fix costs - you incur those costs even if your output is 0. When average total cost is growing, that happens AFTER MC crossed the average total cost at its minimum. That’s already a marginal cost higher than marginal revenue. http://www.debunking-economics.com/Maths/margcost_avcost_files/image018.gif