economics of scale model answer

Question 1

model diagram answer

Answer 1

EOC occur where a firm increases output by varying all factors of production resulting in lower long run average total cost
the firm is initially producing Q quantity of cars with long run average cost of C
as the firms expands in the long run and varies all factor of production, it increases output to Q1 quantity of cars and lowers long run average cost to C1
long run average cost has fallen because of economics of scale such as bulk buying
however this may act as a barrier to entry to other firms seeking to enter the industry