Question

Support or refute the following statement: “Diminishing Returns mean that there are diseconomies of Scale.”

Explain fully how and why the firm’s product and cost curves are functional related

Answer 1

I support the statement as when we produce while keeping all the other inputs constant and only increasing one, marginal output of the product which finally comes out keeps on decreasing because increasing just one factor, keeping all the other constant, would not make any increment in out.

Cost curve is a graphical representation of the costs of production as a function of total quantity produced. They are inter related as, production of any goods takes many inputs and all those inputs alas there costs. Hence, costs of production and production and positively related to each other.