Asked by Jennifer Vandiver on May 11, 2024
Verified
The slope of a long-run average total cost curve exhibiting decreasing returns to scale is:
A) zero.
B) infinite.
C) positive.
D) negative.
Long-Run Average Total Cost
The average cost per unit of output incurred when all factors of production, including capital, are variable, considered over a sufficient period for all adjustments to be made.
Decreasing Returns to Scale
Decreasing returns to scale occur when increasing the inputs used in production results in a less than proportional increase in output.
- Ascertain the magnitude of returns (escalating, steady, or declining) resulting from variations in production volume.
Verified Answer
AR
Aliyana RuslanMay 14, 2024
Final Answer :
C
Explanation :
The slope of a long-run average total cost curve exhibits decreasing returns to scale when the average total cost increases as the level of output increases. This suggests that there are inefficiencies in the production process as the firm expands. Therefore, the slope must be positive.
Learning Objectives
- Ascertain the magnitude of returns (escalating, steady, or declining) resulting from variations in production volume.