If an increase in production increases your firm's short- run average total cost, you should consider expanding current output levels.

Question

Quizplus · Accepted Answer

If an increase in production leads to an increase in short-run average total cost, it means the firm is experiencing diminishing returns to scale. Continuing to expand output levels in this situation would lead to even higher costs and lower profits. Therefore, the firm should consider reducing output levels or finding ways to improve efficiency.

If an Increase in Production Increases Your Firm's Short- Run