For a firm that experiences decreasing returns to scale over the entire range of output:
A)the SRMC curve is downward- sloping.
B)the LRAC curve is upward- sloping.
C)the SRMC curve is upward- sloping.
D)the SRAC curve is upward- sloping.

Question

Quizplus · Accepted Answer

When a firm experiences decreasing returns to scale over the entire range of output, its LRAC (long-run average cost) curve is upward-sloping. This means that as the firm increases its output, its average cost per unit also increases. This is because the firm is not able to take advantage of economies of scale and production becomes more costly as output increases. While the SRMC (short-run marginal cost) curve and SRAC (short-run average cost) curve may also be upward-sloping in this scenario, the LRAC curve is the best choice as it reflects the long-run trend of average cost at different output levels.

For a Firm That Experiences Decreasing Returns to Scale Over