A Firm Whose Production Function Displays Increasing Returns to Scale

question 7

Multiple Choice

A firm whose production function displays increasing returns to scale will have a total cost curve that is

• A)a straight line through the origin.
• B)a curve with a positive and continually decreasing slope.
• C)a curve with a positive and continually increasing slope.
• D)a curve with a negative and continually decreasing slope.

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Definitions:

Market Failure

A scenario where the distribution of goods and services through a free market fails to achieve efficiency, typically resulting in a decrease in overall social welfare.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they can be used by everyone without diminishing availability to others, such as public parks and street lighting.

Price Mechanism

The system by which the prices of goods and services are determined in a free market, through the forces of supply and demand.

Government "Five-Year Plan"

A centralized and often government-enforced economic development strategy, typically aimed at rapid industrialization or development within a five-year timeframe.