Asked by Kathleen Hoang on Jun 18, 2024
Verified
Refer to Figure 6.4.1 above. According to the diagram below, where each isoquant's output level is marked to the right of the isoquant, production is characterized by:
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) increasing, constant and decreasing returns to scale.
Isoquant
A curve that represents all the combinations of inputs that produce the same level of output in the production process.
Returns to Scale
The rate at which output changes if the scale of all inputs is changed by the same proportion.
Output Level
The amount of product or service that is produced by a company or an economy at a given time.
- Determine the circumstances that signal growth, stability, or decline in returns to scale within production processes.
Verified Answer
PN
Pamela NietzscheJun 19, 2024
Final Answer :
C
Explanation :
The isoquants are getting further apart from each other as we move from left to right, which means that an increase in inputs (labor and capital) results in a more than proportionate increase in output. This indicates increasing returns to scale.
Learning Objectives
- Determine the circumstances that signal growth, stability, or decline in returns to scale within production processes.
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