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Figure: Long-Run Average Cost
-(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from 0 to A.
A) decreasing returns to scale
B) constant returns to scale
C) increasing returns to scale
D) negative costs of production

Question

Use the following to answer questions:
Figure: Long-Run Average Cost 
-(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from 0 to A.
A) decreasing returns to scale 
B) constant returns to scale 
C) increasing returns to scale 
D) negative costs of production

Quizplus · Accepted Answer

In the output region from 0 to A, the long-run average cost curve is downward sloping, indicating increasing returns to scale, where costs per unit decrease as output increases.

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