Asked by Daisy Farhm on May 05, 2024
Verified
If a firm increases all of its inputs by 10 percent and its output increases by 10 percent,then:
A) it is encountering diseconomies of scale.
B) it is encountering economies of scale.
C) it is encountering constant returns to scale.
D) the marginal products of all inputs are falling.
Inputs
Resources used in the production process to create goods and services, including labor, capital, materials, and energy.
Output
The quantity of goods or services produced by a company, industry, or economy within a specified time period.
Constant Returns to Scale
A situation in production where increasing all inputs by a certain proportion results in output increasing by that same proportion.
- Apprehend the instigators and ramifications of economies and diseconomies of scale in the field of production.
Verified Answer
IA
ifreelance academicMay 05, 2024
Final Answer :
C
Explanation :
If a firm increases all of its inputs by the same proportion and its output also increases by the same proportion, then it is experiencing constant returns to scale. This means that the marginal products of all the inputs remain constant. Economies of scale would occur if the increase in output was greater than the increase in inputs, while diseconomies of scale would occur if the increase in output was less than the increase in inputs.
Learning Objectives
- Apprehend the instigators and ramifications of economies and diseconomies of scale in the field of production.