Assume a firm is using 10 units of capital and 10 units of labour and is producing 10 widgets per hour.Now it doubles both inputs,resulting in output of 30 widgets per hour.This firm is experiencing
A)increasing returns.
B)decreasing returns.
C)diseconomies of scale.
D)constant returns.
E)increasing costs.

Question

Quizplus · Accepted Answer

When the firm doubles both inputs (capital and labour) and output increases from 10 widgets per hour to 30 widgets per hour, it is experiencing increasing returns to scale. This means that the firm is able to produce more output proportionally, given a proportional increase in inputs.

Assume a Firm Is Using 10 Units of Capital and 10