Question

If a firm adds multiple layers of management as it increases its scale of production, thus adding to its costs, we would expect its long-run average cost curve to be :

downward sloping. horizontal. upward sloping. vertical. U-shaped.

Answer 1

ans UPWARD SLOPING

The Long Run Average Cost curve of a firm shows the minimum or lowest average total cost at which a firm can produce any given level of output in the long run (when all inputs are variable). A curve that touches the minimum points of all short run average cost curves is long run average cost and also also U shaped. The falling portion of this curve shows economies of scale and the rising portion shows dis economies of scale.

In microeconomics, diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or in output, resulting in production of goods and services at increased per-unit costs.

as the scale of the production increases, the cost cost increases. thus there are dis economies of scale. so the average cost curve rises in the long run if there are diseconomies of scale. thus UPWARD SLOPING

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