Asked by Jason Brownlee on May 27, 2024
Verified
Many mining and mineral extraction processes tend to exhibit increasing returns to scale. Suppose copper mines have increasing returns, and the existing copper mines reduce their capital and labor inputs by 25 percent in response to a global recession. What is the expected impact on copper output?
A) Output increases by less than 25 percent.
B) Output decreases by less than 25 percent.
C) Output decreases by exactly 25 percent.
D) Output decreases by more than 25 percent.
Increasing Returns
A concept in economics where an increase in the scale of production leads to a greater than proportional increase in output.
Copper Mines
Sites or locations where copper ore is extracted from the earth for commercial value and industrial use.
Global Recession
A period of worldwide economic decline characterized by reduced industrial production, trade, and consumer spending.
- Illustrate the differentiation between progressive, static, and regressive returns to scale in manufacturing operations.
Verified Answer
JN
Julian Nieto
May 28, 2024
Final Answer :
D
Explanation :
Since copper mines have increasing returns to scale, reducing inputs by 25 percent will result in a decrease in output by more than 25 percent. The exact amount of decrease in output will depend on the specific production function and the degree of increasing returns to scale.
Learning Objectives
- Illustrate the differentiation between progressive, static, and regressive returns to scale in manufacturing operations.