Which of the Following Cost Curves Demonstrate Increasing Returns to Scale

question 109

Multiple Choice

Which of the following cost curves demonstrate increasing returns to scale?

• A)a downward-sloping long-run average cost curve
• B)an upward-sloping long-run average cost curve
• C)a horizontal long-run average cost curve
• D)a vertical long-run average cost curve
• E)returns to scale have nothing to do with the shape of the long-run average cost curve

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Definitions:

MRS (Marginal Rate Of Substitution)

The rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction.

MRT (Marginal Rate Of Transformation)

The rate at which goods or services can be transformed into other goods or services, reflecting the opportunity cost of shifting resources in production.

Marginal Rates

The additional or incremental tax rate applied to every additional dollar of income.

First Theorem

Likely refers to the First Fundamental Theorem of Welfare Economics, which states that competitive markets lead to an efficient allocation of resources under certain conditions.