Figure

Total Cost Function for a Production System Exhibiting Increasing, Then Decreasing, Returns to Scale

With increasing returns to scale, total cost rises slower than total output. With decreasing returns to scale, total cost rises faster than total output. Total cost functions often display an S-shape, reflecting varying returns to scale at various activity levels.

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Total Cost Function for a Production System Exhibiting Increasing, Then Decreasing, Returns to Scale

With increasing returns to scale, total cost rises slower than total output. With decreasing returns to scale, total cost rises faster than total output. Total cost functions often display an S-shape, reflecting varying returns to scale at various activity levels.

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