Concept: A rising long-run average cost curve shows that costs per unit increase as output expands.
Explanation: The long-run average cost (
LRAC) curve falls when the firm enjoys economies of scale.
As output rises,
LRAC falls because the firm benefits from factors such as specialization, bulk buying, and better use of capital.
However, beyond a certain output level, the
LRAC curve begins to rise.
This rising section indicates that the firm is experiencing diseconomies of scale, such as management inefficiency and poor coordination.
Therefore, a rising
LRAC curve means the average cost per unit increases with more production.
Answer: C. diseconomies of scale