Answer to Question #205299 in Microeconomics for Dawn Hope Bantillo

Question

Is it possible for firms for firms to experience both increasing and diminishing returns?

Answer 1

No;because the two conceptions are diametrically opposed. If all factors of production are increased at the same rate, increasing retirns to scale lowers the minimal average cost.

However, as you raise only one factor of production while keeping the rest constant, the marginal cost of creating a unit decreases.