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Author Question: How do increasing returns to scale affect the shape of the long-run average cost curve? What will ... (Read 114 times)

fbq8i

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on: Jun 29, 2018
How do increasing returns to scale affect the shape of the long-run average cost curve?
 
  What will be an ideal response?

Question 2

If marginal costs are constant what will the average variable cost curve look like? What about the average total cost curve?
 
  What will be an ideal response?


zacnyjessica

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Reply #1 on: Jun 29, 2018
Answer to Question 1

When the firm faces increasing returns to scale, average costs per unit produced fall as the firm's scale of production rises. Thus, the long-run average cost curve would be downward sloping.

Answer to Question 2

The average variable cost curve will coincide with the average variable cost. The average total cost curve will slope downward but will not be U-shaped.


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