AP Microeconomics · Past multiple choice · Question 8 · Four-function calculator
Spotting economies of scale
Choose the cost pattern that shows economies of scale as a firm grows its output.
The lesson this question tests
1 Read the question
The question is College Board's: sample question 8 in AP Microeconomics Course and Exam Description, Effective Fall 2026. It starts on page 136 of the PDF. A four-function calculator is allowed, as on the exam.
Open Question 8 (PDF, page 136)
2 Pick your answer
3 Check the explanation
Why the answer is B open once you have picked
Economies of scale is a long-run idea. In the long run a firm can change every input, including the size of its plant, so the question is what happens to cost per unit as the whole operation grows. If long-run average total cost falls as output increases, the firm is enjoying economies of scale; if it rises, that is diseconomies of scale; if it stays flat, constant returns to scale.
Only the long-run curve compares plants of different sizes, so only it can show what scale does to cost.
Each choice
- A. Short-run AVC falls while average product of labor is rising, which can continue even after marginal returns start to diminish. It is a pattern inside one fixed plant and says nothing about what happens when the firm itself gets bigger.
- B (correct). Economies of scale show up on the long-run average total cost curve, which falls as the firm grows.
- C. Falling marginal cost is a short-run result of rising marginal product. Scale effects are judged on long-run average cost, not on MC.
- D. Average fixed cost falls whenever output rises, for any firm, since the same fixed cost is spread over more units. It cannot signal anything special about scale, and in the long run no cost is fixed.
- E. When MC is above ATC, ATC is rising. That points toward rising average costs, the opposite of what economies of scale look like.
Question and answer key: College Board. The title and summary are ours, and so is the explanation.