The following figure shows the long-run average cost curve of a firm.
Figure 6-1

-Refer to Figure 6-1.The production function of the firm displays decreasing returns to scale at all levels of output between _____.
A)0A to 0E
B)0C to 0D
C)0D to 0E
D)0A to 0B
E)0B to 0D

Question

The following figure shows the long-run average cost curve of a firm.
Figure 6-1
 
-Refer to Figure 6-1.The production function of the firm displays decreasing returns to scale at all levels of output between _____.
A)0A to 0E 
B)0C to 0D 
C)0D to 0E 
D)0A to 0B 
E)0B to 0D

Quizplus · Accepted Answer

According to the graph, the long-run average cost curve is U-shaped, indicating that the production function displays decreasing returns to scale at low levels of output and increasing returns to scale at high levels of output. Therefore, the answer is not A, D, or E as these options only specify one end of the U-shaped curve while the question asks for the entire range of output levels with decreasing returns to scale. Option B specifies the range where the long-run average cost curve is at its minimum point, which corresponds to constant returns to scale, not decreasing returns to scale. The only remaining option is C, which correctly identifies the range where the long-run average cost curve slopes upward, indicating decreasing returns to scale.

The Following Figure Shows the Long-Run Average Cost Curve of a Firm