Under decreasing returns to scale, average cost rises as the quantity produced increases. Over this range of output, the marginal cost curve is higher than the average cost curve.
Added by Olga R.
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Decreasing returns to scale occur when increasing the quantity of inputs leads to a less than proportionate increase in the quantity of output. Average cost is the total cost divided by the number of units produced. Marginal cost is the additional cost incurred by Show more…
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