If a firm has a downward-sloping long-run average cost curve, then:

CA Foundation · Business Economics · MTP · June 2024
If a firm has a downward-sloping long-run average cost curve, then:
(A) A. it is experiencing decreasing returns to scale.
(B) B. it is experiencing decreasing returns.
(C) C. it is a natural monopoly.
(D) D. marginal cost is greater than average cost.

Suggested Answer and Working Notes:

Correct Answer: Option (A)

A. it is experiencing decreasing returns to scale.

Topics: Theory of Production and Cost

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