If there are large fixed or research and development costs, such as in the pharmaceutical industry, production can be characterized by:

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Quizplus · Accepted Answer

Increasing returns to scale occur when there are large fixed costs or research and development costs because as production increases, these costs can be spread out over a larger output, leading to lower average costs. This is common in industries like pharmaceuticals where there are significant costs associated with the development and testing of new drugs.

If There Are Large Fixed or Research and Development Costs