Buffalo Aircraft doubles the amount of all of the inputs it uses-the factory doubles in size and twice as many workers are hired.After this expansion,the number of aircraft produced triples.If the price of inputs is unchanged,this means that Buffalo Aircraft is operating with:
A)increasing marginal cost.
B)economies of scale.
C)increasing average total cost.
D)decreasing average variable cost.

Question

Quizplus · Accepted Answer

When Buffalo Aircraft doubles the amount of all inputs, the factory expands and twice as many workers are hired, indicating that the company is experiencing economies of scale. This is because the inputs are being increased in a proportionate manner that is resulting in a larger output with a lower per-unit cost. The fact that the number of aircraft produced triples after the expansion also supports the idea of economies of scale.

Buffalo Aircraft Doubles the Amount of All of the Inputs