A Firm Decreases Its Scale of Operation and Discovers That

Multiple Choice

A firm decreases its scale of operation and discovers that its long-run average costs decrease. Which of the following does this indicate?

A) The firm's scale initially was too small to experience economies of scale.
B) Its long-run marginal cost was smaller with the larger plant than with the smaller plant.
C) Labour's marginal product has increased.
D) The firm's scale initially was so large that it experienced diseconomies of scale.
E) Diseconomies of scale were absent in the larger plant.