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 B to C.
A) constant returns to scale
B) decreasing returns to scale
C) increasing returns to scale
D) falling marginal cost

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 B to C.
A) constant returns to scale 
B) decreasing returns to scale 
C) increasing returns to scale 
D) falling marginal cost

Quizplus · Accepted Answer

The firm has decreasing returns to scale in the output region from B to C because the long-run average cost curve is upward sloping in this region. This means that as output increases, the firm's average cost of production increases.

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