True or false? If the long-run average total cost curve is downward-sloping, then the firm is experiencing decreasing returns to scale

Accounting Dec 08, 2020

True or false? If the long-run average total cost curve is downward-sloping, then the firm is experiencing decreasing returns to scale.

Expert Solution

False

The statement 'If the long-run average total cost curve is downward-sloping, then the firm is experiencing decreasing returns to scale' is false. It is because the downward-sloping average total cost curve is the result of an economies of scale. In other words, when a firm increases production, its average total cost curve will slope downward due to a decline in cost.

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