What is true if decreasing returns to scale are present?
A)Average fixed cost will rise.
B)Total variable cost will fall.
C)Economies of scale are also present.
D)Diseconomies of scale are present.

Question

Quizplus · Accepted Answer

Decreasing returns to scale mean that as a firm increases its inputs, the output will not increase proportionately, which can cause inefficiencies and higher costs. Therefore, the firm will experience diseconomies of scale, resulting in higher average costs.

What Is True If Decreasing Returns to Scale Are Present