Increasing returns to scale for a firm is shown graphically by
A)an upward- sloping long- run average cost curve.
B)a vertical long- run average cost curve.
C)a horizontal long- run average cost curve.
D)a downward- sloping long- run average cost curve.
E)None of the above; returns to scale have nothing to do with the shape of the long- run average cost curve.

Question

Quizplus · Accepted Answer

Increasing returns to scale for a firm are shown graphically by a downward-sloping long-run average cost curve. This means that as the firm produces more output, the average cost of production decreases, allowing the firm to increase its profits.

Increasing Returns to Scale for a Firm Is Shown Graphically