The diagram presents a long-run average cost curve (LRAC) together with three short-run average cost curves (SRAC1, SRAC2 and SRAC3) for a single firm. Each short-run average cost curve corresponds to a fixed factor of production. For output levels between OL and OM, which statement is not correct?
- AAverage fixed costs are falling.
- BEconomies of scale are being experienced.
- CThe law of diminishing returns is operative.
- DThere are decreasing returns to scale.