A Firm's Short-Run Average Cost Curve Is U-Shaped

question 61

Multiple Choice

A firm's short-run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm's returns to scale?

• A) The firm experiences increasing returns to scale.
• B) The firm experiences increasing, constant, and decreasing returns in that order.
• C) The firm experiences first decreasing, then increasing returns to scale.
• D) The short-run average cost curve reveals nothing regarding returns to scale.

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Definitions:

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