-Refer to Figure 8.6,which shows just three of a firm's various possible short-run average cost curves.Which of the following statements is true?
A) The firm experiences increasing returns to scale at production levels above 130 units of output
B) The firm experiences constant returns to scale
C) The firm experiences increasing returns to scale up to a production level of 130 units of output
D) The firm experiences decreasing returns to scale up to a production level of 130 units of output

Question

-Refer to Figure 8.6,which shows just three of a firm's various possible short-run average cost curves.Which of the following statements is true?
A) The firm experiences increasing returns to scale at production levels above 130 units of output 
B) The firm experiences constant returns to scale 
C) The firm experiences increasing returns to scale up to a production level of 130 units of output 
D) The firm experiences decreasing returns to scale up to a production level of 130 units of output

Quizplus · Accepted Answer

Increasing returns to scale are indicated by a decreasing average cost as output increases, which is typically observed up to a certain level of production (in this case, 130 units) before average costs start to increase, suggesting a shift to decreasing returns to scale.