FIGURE 8-2
-Refer to Figure 8-2. Increasing returns to scale occur over the output range
A) 0 to Q1 only.
B) Q1 to Q2 only.
C) Q2 to Q3 only.
D) 0 to Q3 only.
E) beyond Q3 only.

Question

FIGURE 8-2
-Refer to Figure 8-2. Increasing returns to scale occur over the output range
A) 0 to Q1 only. 
B) Q1 to Q2 only. 
C) Q2 to Q3 only. 
D) 0 to Q3 only. 
E) beyond Q3 only.

Quizplus · Accepted Answer

Increasing returns to scale occur when the output increases more than proportionately with inputs. In Figure 8-2, increasing returns to scale occur when increasing output from 0 to Q3. At Q3, the production function exhibits constant returns to scale. Therefore, the answer is D - 0 to Q3 only.

FIGURE 8-2 -Refer to Figure 8-2. Increasing Returns to Scale Occur Over