Long-Run Costs and Returns to Scale in Economics

The video tutorial explains the concepts of long run costs and returns to scale in economics. It distinguishes between short run and long run production, highlighting the flexibility of production factors in the long run. The tutorial defines returns to scale and explores constant, increasing, and decreasing returns through examples, showing how changes in resource use affect output and average costs.

How does the average cost change when a firm experiences increasing returns to scale?

What happens in the case of decreasing returns to scale?

Summarize the implications of returns to scale on production and costs in the long run.