As any firm with decreasing returns to scale increases its output:
A) its average cost of production must rise.
B) its average cost of production must fall.
C) its total cost of production must fall.
D) its marginal cost of production must rise.

Question

Quizplus · Accepted Answer

If a firm experiences decreasing returns to scale, it means that its output is increasing at a decreasing rate as the inputs are increased. This implies that the firm is becoming less efficient at producing each additional unit of output. As a result, the firm's average cost of production must rise, since it is now using more resources to produce each unit of output, leading to higher per-unit production costs.

As Any Firm with Decreasing Returns to Scale Increases Its