Question

Total variable cost curve begins to __________ with the onset of increasing returns.

• A. rise at an increasing rate
• B. rise at a decreasing rate
• C. fall at an increasing rate
• D. stabilize

Answer 1

Answer: (B)

rise at a decreasing rate

As the firm experience increasing returns to scale, this means that the average variable cost per unit is falling, thus the total variable cost curve will rise at a decreasing rate.