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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