Asked by Caleb Farris on Jun 17, 2024
Verified
In a production process, all inputs are increased by 10%; but output increases less than 10%. This means that the firm experiences:
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) negative returns to scale.
Returns to Scale
The change in output resulting from a proportional change in all inputs (factors of production) in the long run.
Inputs
Resources such as labor, materials, and capital that are used in the production process to create goods or services.
Output
The total amount of goods or services produced by a firm, industry, or economy over a certain period of time.
- Recognize the indicators of expanding, steady, or diminishing returns to scale in manufacturing outputs.
Verified Answer
KH
Kameron HatcherJun 17, 2024
Final Answer :
A
Explanation :
When all inputs are increased by 10% and output increases by less than 10%, the production process is experiencing decreasing returns to scale. This means that the firm is becoming less efficient as it expands its production.
Learning Objectives
- Recognize the indicators of expanding, steady, or diminishing returns to scale in manufacturing outputs.