Economics (AS & A Level) · Oct / Nov 2024 · Paper 31 · Question 4
9708Types of cost, revenue and profit, short-run and long-run production
The diagram shows a firm's long-run average cost curve (LRAC). [diagram: cost on vertical axis, output on horizontal axis, U-shaped LRAC curve with point X on the downward-sloping section and point Y at the minimum] What could explain the shape of the curve from X to Y?
- Aa decrease in total fixed cost
- Bincreasing returns to scale
- Cinternal diseconomies of scale
- Dmore than one factor of production is variable
As printed in the paper
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Correct answer: B. increasing returns to scale
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