When an increase of a firm's scale of production leads to higher average costs per unit produced, there is an increasing return to scale.

Question

Quizplus · Accepted Answer

When an increase in a firm's scale of production leads to higher average costs per unit produced, it indicates diseconomies of scale, not increasing returns to scale. Increasing returns to scale occur when average costs per unit decrease as production volume increases.

When an Increase of a Firm's Scale of Production Leads