Suppose that a firm increases inputs by 10% and observes a 13% increase in output.If the prices of its inputs remain constant,then
A) constant returns to scale are present.
B) average cost decreases.
C) total cost decreases.
D) average cost is unchanged.
E) average cost could be higher or lower.

Question

Quizplus · Accepted Answer

When output increases by a greater percentage than inputs, the firm experiences increasing returns to scale, leading to a decrease in average cost.

Suppose That a Firm Increases Inputs by 10% and Observes