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The negatively-sloped (i.e. falling) part of the long-run average total cost curve is due to which of the following?
- a)Diseconomies of scale.
- b)Diminishing returns.
- c)The difficulties encountered in coordinating the many activities of a large firm.
- d)The increase in productivity that results from specialization.
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
The negatively-sloped (i.e. falling) part of the long-run average tota...
Explanation:
The long-run average total cost (LRATC) curve shows the minimum average total cost that a firm can achieve for any given level of output in the long run, when all inputs are variable. It is a U-shaped curve, with a downward-sloping part followed by an upward-sloping part.
The negatively-sloped (i.e. falling) part of the LRATC curve is due to the following reasons:
Specialization and productivity:
- Specialization refers to the division of labor among workers, where each worker performs a specific task that he or she is best at. This leads to an increase in productivity, as workers become more skilled and efficient in their respective tasks.
- Increased productivity leads to a decrease in the average cost of production, as the same amount of output can be produced with fewer resources (i.e. labor, capital, etc.).
- This is why the LRATC curve slopes downward initially, as the firm experiences economies of scale due to specialization and productivity gains.
Advantages of specialization:
- Specialization enables the workers to become more skilled and efficient in performing their respective tasks.
- Workers can focus on their strengths and develop their skills, rather than trying to do everything themselves.
- This leads to a decrease in the amount of time and effort required to produce a given output, and hence a decrease in the average cost of production.
- Specialization also allows the firm to take advantage of economies of scale, as it can produce more output with the same amount of resources, leading to lower average costs.
Conclusion:
Therefore, the correct answer is option D, as the negatively-sloped part of the LRATC curve is due to the increase in productivity that results from specialization.
The long-run average total cost (LRATC) curve shows the minimum average total cost that a firm can achieve for any given level of output in the long run, when all inputs are variable. It is a U-shaped curve, with a downward-sloping part followed by an upward-sloping part.
The negatively-sloped (i.e. falling) part of the LRATC curve is due to the following reasons:
Specialization and productivity:
- Specialization refers to the division of labor among workers, where each worker performs a specific task that he or she is best at. This leads to an increase in productivity, as workers become more skilled and efficient in their respective tasks.
- Increased productivity leads to a decrease in the average cost of production, as the same amount of output can be produced with fewer resources (i.e. labor, capital, etc.).
- This is why the LRATC curve slopes downward initially, as the firm experiences economies of scale due to specialization and productivity gains.
Advantages of specialization:
- Specialization enables the workers to become more skilled and efficient in performing their respective tasks.
- Workers can focus on their strengths and develop their skills, rather than trying to do everything themselves.
- This leads to a decrease in the amount of time and effort required to produce a given output, and hence a decrease in the average cost of production.
- Specialization also allows the firm to take advantage of economies of scale, as it can produce more output with the same amount of resources, leading to lower average costs.
Conclusion:
Therefore, the correct answer is option D, as the negatively-sloped part of the LRATC curve is due to the increase in productivity that results from specialization.
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The negatively-sloped (i.e. falling) part of the long-run average tota...
The negatively sloped part of long run avg cost curve is due to economies of scale and here option (d) is economies to scale thats why (d) is ans
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The negatively-sloped (i.e. falling) part of the long-run average total cost curve is due to which of the following?a)Diseconomies of scale.b)Diminishing returns.c)The difficulties encountered in coordinating the many activities of a large firm.d)The increase in productivity that results from specialization.Correct answer is option 'D'. Can you explain this answer?
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