Decrease returns to scale means that _____ as ______?
Correct answer: D. long run average cost rises, output rises
- A. Short run marginal cost rises, output rises
- B. long run marginal cost rises, output rises
- C. Short run average cost rises, output rises
- D. long run average cost rises, output rises
Explanation
Decreasing returns to scale means that increasing all inputs causes output to rise by a smaller proportion, which is reflected by rising long-run average cost as output expands. Short-run cost curves do not define returns to scale.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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