JAMB - Economics (2024 - No. 14)
A firm's average cost decreases in the long-run because of
increasing returns to scale
diminishing average returns
decreasing average fixed cost
decreasing marginal returns
Explanation
Increasing returns to scale occur when a firm increases its inputs (such as labor and capital) in the production process, resulting in a more than proportionate increase in output. As a result, the firm experiences economies of scale, leading t a decrease in average cost. When the firm can produce more output with the same or lower cost per unit, the average cost decreases.
Comments (0)
