C. decreasing returns to scale<\/strong>.<\/p>\nIncreasing returns to scale occur when a firm’s output increases by more than the amount of inputs it uses. This means that the firm can produce more output with the same amount of inputs, or it can produce the same amount of output with fewer inputs. As a result, the firm’s costs per unit of output will decrease.<\/p>\n
Constant returns to scale occur when a firm’s output increases by the same amount as the amount of inputs it uses. This means that the firm can produce more output by using more inputs, and it can produce the same amount of output by using fewer inputs. As a result, the firm’s costs per unit of output will remain constant.<\/p>\n
Decreasing returns to scale occur when a firm’s output increases by less than the amount of inputs it uses. This means that the firm needs to use more inputs to produce more output, or it can produce the same amount of output with fewer inputs. As a result, the firm’s costs per unit of output will increase.<\/p>\n
In perfect competition, firms are price-takers, which means that they cannot influence the market price. The market price is determined by the intersection of the demand and supply curves. If the demand for a product falls, the demand curve will shift to the left, and the market price will fall. If the production of a product is subject to decreasing returns to scale, the firm’s costs per unit of output will increase. As a result, the firm will be less profitable at the lower market price, and it may choose to produce less output. This will shift the supply curve to the left, and the market price will fall further.<\/p>\n
Therefore, the price under perfect competition will rise as the demand falls when the production is subject to decreasing returns to scale<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"[amp_mcq option1=”increasing returns to scale” option2=”constant returns to scale” option3=”decreasing returns to scale” option4=”none of these” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-59497","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n
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