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WAEC Economics 2018 Question 17

Question 17

Theory of Costs and Revenue

A firm's average cost decreases in the long-run because of

  1. A.increasing returns to scale.
  2. B.diminishing supply.
  3. C.decreasing marginal returns.
  4. D.decreasing average fixed cost.
Show the answer and explanation

Answer: A (increasing returns to scale.)

Explanation

Increasing returns to scale (economies of scale) lower long-run average cost.