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# The long-run ATC curve in this figure derives its shape from:

 ▲ 0 ▼ ♥ 0 The long-run ATC curve in this figure derives its shape from: a. decreasing, then increasing, short-run returns. b. increasing, then decreasing, short-run returns. c. economies, then diseconomies, of scale. d. diseconomies, then economies, of scale.

Here is the full solution including the answer and explanation.

Explanation
c is correct
The economy of scale is defined as the cost advantages, decrement in the unit cost because of the increment in the number of units produced. Diseconomies of scale cost disadvantages, increment in the unit cost because of the increment in the number of units produced. The long-run cost curve behaves based on the economy of scale and diseconomies of scale. The economy of scale reduces per unit cost that leads to downward sloping ATC and diseconomies of scale increase the unit cost that leads to an upward-sloping ATC curve.

a is incorrect
The short-run increasing return to scale and decreasing return to scale affects the short-run ATC curve. This is because it has an insignificant effect in the long run because its long-run ATC is based on the economies and diseconomies of scale.

b is incorrect
The short-run ATC curve is affected by the increasing return to scale and decreasing return to scale because it has an insignificant effect in the long run because its long-run ATC is based on the economies and diseconomies of scale.

d is incorrect
Diseconomies of scale is a cost disadvantage, increment in the unit cost because of the increment in the number of units produced. On the other hand, economies of scale is a cost advantage, decrement in the unit cost because of the increment in the number of units produced. The given statement is completely reversed which means the ATC cost curve should be inclined first and declines after that which is incorrect.