Suppose a firm experiences decreasing returns to scale.This is shown graphically by
A)a downward- sloping long- run marginal- cost curve.
B)an increasing marginal product curve.
C)a horizontal long- run average cost curve.
D)a downward- sloping long- run average cost curve.
E)an upward- sloping long- run average cost curve.

Question

Quizplus · Accepted Answer

Decreasing returns to scale means that as the firm increases its scale of production, the average cost of production increases. Therefore, the long-run average cost curve will slope upward.

Suppose a Firm Experiences Decreasing Returns to Scale