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The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?
- a)Diseconomies of scale.
- b)Increasing returns.
- c)The firm being able to take advantage of large-scale production techniques as it expands its output.
- d)The increase in productivity that results from specialization.
Correct answer is option 'A'. Can you explain this answer?
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The positively sloped (i.e. rising) part of the long run average total...
The positively sloped (i.e. rising) part of the long run average total cost curve is due to diseconomies of scale
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The positively sloped (i.e. rising) part of the long run average total...
The positively sloped part of the long run average total cost (LRATC) curve is due to diseconomies of scale. Diseconomies of scale occur when a firm's average total cost increases as it expands its output in the long run.
Diseconomies of scale can be attributed to several factors, including:
1. Managerial and Coordination Issues:
- As a firm grows larger, it becomes more difficult to coordinate and manage its operations effectively.
- Communication and decision-making processes may become slower and less efficient, leading to increased costs.
- The need for additional layers of management and bureaucracy may also arise, further increasing costs.
2. Increased Complexity and Specialization:
- Larger firms often have more complex production processes and product lines.
- Specialized machinery and equipment may be required, which can be expensive to acquire and maintain.
- Training and managing specialized workers can also be more challenging and costly.
3. Diseconomies of Scope:
- When a firm produces a wide range of products or operates in multiple markets, it may face diseconomies of scope.
- The firm may struggle to efficiently allocate resources across different products or markets, leading to increased costs.
4. Lack of Flexibility:
- Larger firms may find it harder to quickly adapt to changes in the market or respond to customer demands.
- Bureaucratic processes and organizational inertia can hinder innovation and agility, resulting in higher costs.
Overall, these factors contribute to higher average total costs as a firm expands its output beyond a certain point. As a result, the LRATC curve slopes upward in the region of diseconomies of scale.
It's important to note that the LRATC curve consists of three segments: economies of scale (downward sloping), constant returns to scale (flat), and diseconomies of scale (upward sloping). The positively sloped part represents the point at which the firm starts experiencing diseconomies of scale.
In summary, the positively sloped part of the LRATC curve is due to diseconomies of scale, which arise from managerial and coordination issues, increased complexity and specialization, diseconomies of scope, and lack of flexibility. These factors lead to higher average total costs as a firm expands its output in the long run.
Diseconomies of scale can be attributed to several factors, including:
1. Managerial and Coordination Issues:
- As a firm grows larger, it becomes more difficult to coordinate and manage its operations effectively.
- Communication and decision-making processes may become slower and less efficient, leading to increased costs.
- The need for additional layers of management and bureaucracy may also arise, further increasing costs.
2. Increased Complexity and Specialization:
- Larger firms often have more complex production processes and product lines.
- Specialized machinery and equipment may be required, which can be expensive to acquire and maintain.
- Training and managing specialized workers can also be more challenging and costly.
3. Diseconomies of Scope:
- When a firm produces a wide range of products or operates in multiple markets, it may face diseconomies of scope.
- The firm may struggle to efficiently allocate resources across different products or markets, leading to increased costs.
4. Lack of Flexibility:
- Larger firms may find it harder to quickly adapt to changes in the market or respond to customer demands.
- Bureaucratic processes and organizational inertia can hinder innovation and agility, resulting in higher costs.
Overall, these factors contribute to higher average total costs as a firm expands its output beyond a certain point. As a result, the LRATC curve slopes upward in the region of diseconomies of scale.
It's important to note that the LRATC curve consists of three segments: economies of scale (downward sloping), constant returns to scale (flat), and diseconomies of scale (upward sloping). The positively sloped part represents the point at which the firm starts experiencing diseconomies of scale.
In summary, the positively sloped part of the LRATC curve is due to diseconomies of scale, which arise from managerial and coordination issues, increased complexity and specialization, diseconomies of scope, and lack of flexibility. These factors lead to higher average total costs as a firm expands its output in the long run.
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The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Increasing returns.c)The firm being able to take advantage of large-scale production techniques as it expands its output.d)The increase in productivity that results from specialization.Correct answer is option 'A'. Can you explain this answer?
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The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Increasing returns.c)The firm being able to take advantage of large-scale production techniques as it expands its output.d)The increase in productivity that results from specialization.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Increasing returns.c)The firm being able to take advantage of large-scale production techniques as it expands its output.d)The increase in productivity that results from specialization.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Increasing returns.c)The firm being able to take advantage of large-scale production techniques as it expands its output.d)The increase in productivity that results from specialization.Correct answer is option 'A'. Can you explain this answer?.
The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Increasing returns.c)The firm being able to take advantage of large-scale production techniques as it expands its output.d)The increase in productivity that results from specialization.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Increasing returns.c)The firm being able to take advantage of large-scale production techniques as it expands its output.d)The increase in productivity that results from specialization.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Increasing returns.c)The firm being able to take advantage of large-scale production techniques as it expands its output.d)The increase in productivity that results from specialization.Correct answer is option 'A'. Can you explain this answer?.
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