A firm whose production function displays increasing returns to scale will have a total cost curve that is
A)a straight line through the origin.
B)a curve with a positive and continually decreasing slope.
C)a curve with a positive and continually increasing slope.
D)a curve with a negative and continually decreasing slope.

Question

Quizplus · Accepted Answer

Increasing returns to scale imply that doubling all inputs more than doubles output, leading to a more than proportional reduction in average costs as production increases. This results in a total cost curve with a positive and continually decreasing slope, as costs increase at a decreasing rate with output.

A Firm Whose Production Function Displays Increasing Returns to Scale