You would expect that your firm is experiencing decreasing returns to scale if
A)Long run average costs increase with output
B)Long run average costs decrease with output
C)Long run average costs are constant with respect to output
D)None of the above

Question

​You would expect that your firm is experiencing decreasing returns to scale if
A)​Long run average costs increase with output
B)Long run average costs decrease with output
C)Long run average costs are constant with respect to output
D)​None of the above

Quizplus · Accepted Answer

If long run average costs increase with output, it indicates that the firm is experiencing decreasing returns to scale. This means that as the firm increases its scale of production, the cost per unit of output increases. This could be due to a variety of reasons, such as inefficiencies in production processes or limited availability of resources.

​You Would Expect That Your Firm Is Experiencing Decreasing Returns

You Would Expect That Your Firm Is Experiencing Decreasing Returns