Question
Microeconomics Question on Consumer theory
A long-run cost function for a product exhibits economies of scale if
A
average cost of production increases when the output increases.
B
the production function has decreasing returns to scale.
C
average cost of production falls as the output increases.
D
average cost of production remains constant as the output increases.
Answer
average cost of production falls as the output increases.
Explanation
Solution
The correct option is (C): average cost of production falls as the output increases.