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Under increasing returns to scale, average cost ? as the quantity produced increases. Over this range...

Under increasing returns to scale, average cost ? as the quantity produced increases. Over this range of output, the marginal cost curve is ? the average cost curve.

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Answer #1

Under increasing returns to scale, average cost decreases as the quantity produced increases. Over this range of output, the marginal cost curve is less than the average cost curve.

Explanation: Under increasing returns to scale, quantity produced will be more than the quantity of resource employed, which means output will more than resource cost. Therefore, average cost decreases as output increases.

When average cost falls, MC < AC. (the marginal cost curve will be below the average cost curve)

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