- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 8. Understanding Economies and Diseconomies of Scale
CFA Practice Question
If the firm has economies of scale in the long run, then the long-run average cost curve is ______.
B. horizontal
C. downward-sloping
D. It depends on whether there are diminishing returns.
E. It depends on the minimum efficient scale.
A. upward-sloping
B. horizontal
C. downward-sloping
D. It depends on whether there are diminishing returns.
E. It depends on the minimum efficient scale.
Correct Answer: C
Economies of scale: a proportional increase in inputs results in a more-than-proportional increase in outputs. Thus, average cost per unit must be falling.
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