Question 5 of 10 Attempt 1 of 2
What is the shape of the LRATC for a firm experiencing economies of scale?
A. Downward sloping
B. Upward sloping
C. Vertical
D. N-shaped
SUBMIT

A. Downward sloping

Explanation:

In Microeconomics, economies of scale can be defined as cost reductions or cost advantages that arises when a business entity is increases its production or are large in size.

This ultimately implies that, when an organization chooses a convenient scale of operation or reduce its scale of production, this would lead to a reduction in the cost of production and consequently, some benefits such as lower long-run average cost, increased sales, profits and lower cost price for the consumers of these finished products.

Generally, economies of scale is evident when employees are able to specialize in a specific task. This is so because having a good number of professionals and experts would increase the level of production or output, as they are quite conversant with the best method of production, time management and efficiency.

Hence, the shape of the long run average total cost (LRATC) for a firm experiencing economies of scale is horizontal and downward sloping.