Explain one possible reason why average cost per unit may increase as the output level of a business increases.

If a firm has decreasing returns to scale their unit cost will increase as output increases. This is because the firm‘s costs are increasing as they increase their output, so the average (the total cost divided by the output) cost is increasing.

RT

Related Economics GCSE answers

All answers ▸

Why are UK government gilt (bond) yields rising and why is that bad?


Analyse the impact that an increase in interest rates would have on employment in the UK.


What are the main macroeconomics variables?


What is the law of demand?