Long-Run Average Total Cost Curve
The concept of diminishing marginal returns applies to short-run production. Which of the following describes the typical shape of a firm’s long-run average total cost (LATC) curve as the scale of production changes?
A
The LATC may initially decline due to economies of scale but eventually rise after reaching minimum efficient scale.
B
The LATC remains flat indicating consistent returns across different scales of operation.
C
The LATC spikes up sharply with every addition of input suggesting immediate diseconomies of scale.
D
The LATC will continually decline reflecting ongoing improvements from learning by doing.
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