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Isabelle Rose, an Economist, is attempting to explain long-run costs to her friend Charlie, who owns Charlie’s Chocolate Boutique, a small candy shop that specializes in unique and high-end candies.

In her explanation, Isabelle uses the long-run average total cost curve, which


displays declining unit costs so long as output is increasing.


has a shape which reflects the law of diminishing returns.


has a shape which is the inverse of the law of diminishing returns.


can be derived by summing horizontally the average total cost curves of all firms in an industry.


indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

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