1. Increasing and decreasing returns to scale (or economies or diseconomies of scale) determine the shape of the long mn average cost curve. Typically. if marginal revenue is greater than marginal cost, then the rm should increase its output. Decreasing returns to scale implies that when all inputs increase by 10%. output will decrease. In perfect competition, the products of different firms in the same industry are perfect substitutes. The slope of an isooost line measures the marginal rate of technical substitution. Consumer surplus is the difference between the maximum the consumer is willing to pay for a product. and what the consumer pays. Consumers will tend to pay most of the excise tax when their demand is relatively inelastic. If the government imposes a price ceiling in a competitive market. there will be deadweight loss. In the long run. the optimal mix of labor and capital is where the marginal product of labor is equal to the marginal product of capital. 10. In the short-an, if P