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Author Question: The law of diminishing returns is the same as the decreasing returns to scale. Do you agree? ... (Read 141 times)

a0266361136

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on: Jun 29, 2018
The law of diminishing returns is the same as the decreasing returns to scale. Do you agree? Explain.
 
  What will be an ideal response?

Question 2

We know that the firm shown in the figure above is a natural monopoly because as output increases, the
 
  A) marginal cost is constant.
  B) demand curve slopes downward.
  C) marginal revenue curve lies below its demand curve.
  D) average total cost decreases so that the firm can supply the market at lower cost than two firms.


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bubulittle310@msn.cn

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

The statement is incorrect. The law of diminishing returns states that as a firm uses more of a variable factor, with a given quantity of fixed factors, the marginal product of the variable factor eventually diminishes. In the long run all factors are variable, and decreasing returns to scale occurs when an increase in all factors by the same percentage results in a smaller percentage increase in output.

Answer to Question 2

D


a0266361136

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Reply #2 on: Jun 29, 2018
Thank you :)


bubulittle310@msn.cn

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Reply #3 on: Jun 29, 2018
Happy to help you


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