Which of the following cost curves demonstrate increasing returns to scale?
A)a downward-sloping long-run average cost curve
B)an upward-sloping long-run average cost curve
C)a horizontal long-run average cost curve
D)a vertical long-run average cost curve
E)returns to scale have nothing to do with the shape of the long-run average cost curve

Question

Quizplus · Accepted Answer

A downward-sloping long-run average cost curve indicates increasing returns to scale. This is because as production increases, the average cost per unit decreases. This means that the firm is able to achieve cost savings by increasing production, indicating increasing returns to scale.

Which of the Following Cost Curves Demonstrate Increasing Returns to Scale