Sieve owns a bike store. Last year his average cost of selling a bike was $1, 00

Question

Sieve owns a bike store. Last year his average cost of selling a bike was $1, 000. If he expands the size of his store this year and sees his average cost decrease to $950, his long run average total cost curve should be vertical. upward-sloping. horizontal. downward-sloping. U-shaped. When firms grow larger they sometimes acquire more market power, meaning that they have greater ability to negotiate lower prices with their suppliers. This ability to negotiate lower prices with their suppliers leads to diseconomies of scale

Explanation / Answer

E is Correct as long run Average total cost curve is u shaped as it will decrease intially but after a certain point of time it will increase substantially.

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