If the long-run average total cost curve is downward-sloping, then the firm is experiencing decreasing returns to scale.

Question

Quizplus · Accepted Answer

If the long-run average total cost curve is downward-sloping, then the firm is experiencing increasing returns to scale. This means that as the firm increases its production level, its average total cost decreases. This is because the firm can take advantage of economies of scale, such as spreading fixed costs over a larger output. On the other hand, if the long-run average total cost curve is upward-sloping, then the firm is experiencing decreasing returns to scale, meaning that as the firm increases its production level, its average total cost increases.

If the Long-Run Average Total Cost Curve Is Downward-Sloping, Then