PRC-3 · Chapter 12 · Question 15 of 69
A printing press experiences 'Increasing Returns to Scale' when it expands its operations. What is the direct consequence of this on its Long-Run Average Cost (LRAC) curve?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The LRAC slopes downwards (Economies of scale)
Explanation
Increasing returns to scale mean output grows faster than input costs. This increasing efficiency drives the per-unit cost (LRAC) down, a phenomenon known as economies of scale.
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