Asked by Christopher Danger on May 04, 2024
Verified
(Figure: Long-Run Average Cost) Use 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
Returns to Scale
The change in output resulting from a proportional change in all inputs, where increases can be constant, increasing, or decreasing.
Long-Run Average Cost
The average cost per unit of output where all inputs, including capital, are variable in the long term.
Marginal Cost
The costs entailed in generating an extra unit of a product or service.
- Familiarize yourself with the economic theories of economies of scale, constant returns to scale, and diseconomies of scale.
Verified Answer
ES
Ernestina SorianoMay 09, 2024
Final Answer :
B
Explanation :
In the output region from B to C, the LRAC is increasing, indicating decreasing returns to scale. This means that as the firm increases its output in this range, the cost per unit of output increases.
Learning Objectives
- Familiarize yourself with the economic theories of economies of scale, constant returns to scale, and diseconomies of scale.
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