Engineers for the Off Road Skateboard Company have determined that a 10% increase in all inputs will cause output to increase by 5%. Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases.
A) total cost to decrease
B) average costs to increase
C) average costs to decrease
D) average fixed costs to increase

Question

Quizplus · Accepted Answer

A 10% increase in inputs leading to only a 5% increase in output indicates decreasing returns to scale, meaning that average costs will increase as output increases.

Engineers for the Off Road Skateboard Company Have Determined That