When the size of a factory (and all its associated inputs)doubles and,as a result,output more than doubles,

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Quizplus · Accepted Answer

The fact that output more than doubles with a doubling of inputs suggests that economies of scale are present. This means that as the size of the factory increases, average costs of production decrease, allowing for greater output at a lower cost. A declining short-run ATC curve would also indicate lower costs at higher levels of production, but this alone does not necessarily imply that output will more than double with a doubling of inputs, and does not rule out diminishing returns in the smaller factory.

When the Size of a Factory (And All Its Associated