Under decreasing returns to scale, average cost _____ (increases/decreases) as quantity produced increases. Over this range of output, the marginal cost curve is _____ (higher than/lower than/equivalent to) the average cost curve.
When decreasing returns set in the proportionate increase in output for a proportionate increase in input starts to fall. This is long-run phenomenon occurring when all factors of production can be changed.
Answer and Explanation: 1
Under decreasing returns to scale, average cost increases as quantity produced increases. Over this range of output, the marginal cost curve is higher ...
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fromChapter 3 / Lesson 71
Understand the meaning of returns to scale in economics. Learn about increasing returns to scale, constant returns to scale and decreasing returns to scale.