When long- run average cost decreases as output increases there are definitely
I. increasing marginal returns.
II. economies of scale.
A) Only I
B) Only II
C) Both I and II
D) Neither I nor II

Question

Quizplus · Accepted Answer

Economies of scale occur when long-run average costs decrease as output increases, indicating that the firm is becoming more efficient in production as it grows. Increasing marginal returns relate to the short-run concept where additional units of input result in a higher increase in output, which is not directly related to the concept of economies of scale.

When Long- Run Average Cost Decreases as Output Increases There