If a firm enjoys economies of scale up to a certain output level, and cost then increases proportionally with output, what can you say about the shape of the long-run average cost curve? The long-run average cost curve_________.
A. is decreasing.
B. is horizontal.
C. is increasing.
D. decreases initially and then is horizontal.
E. is U-shaped.
A horizontal long run average cost curve reflects increase in cost proportionate to output, so the firm's long run average cost curve will fall initially and then become horizontal.
