Question

for a firm that starts with increasing returns to labor, which describes the initial region of the total cost or total variable cost curve: a. it is decreasing at a decreasing rate. b. it is decreasing at an increasing rate. c. it is increasing at a decreasing rate.

Answer 1

The initial region of the total cost or total variable cost curve for a firm that starts with increasing returns to labor is downward-sloping. Initially, there is a region of increasing marginal returns, but it eventually transitions to diminishing marginal returns.

Step-by-step explanation:

The initial region of the total cost or total variable cost curve for a firm that starts with increasing returns to labor is downward-sloping. Initially, as the firm increases the level of labor input, there is a region of increasing marginal returns where output increases at an increasing rate. However, as more labor is added, the firm experiences diminishing marginal returns, causing the total cost or total variable cost to increase at an increasing rate.