Engineers for the Off Road Skateboard Company determine that a 12% increase in all inputs will cause a smaller percentage increase in output. Assuming that input prices remain constant, you correctly deduce that such a change in inputs will cause ________ as output increases.
A) total costs to decrease
B) average costs to increase
C) average costs to decrease
D) average fixed costs to increase

Question

Quizplus · Accepted Answer

When a 12% increase in inputs leads to a smaller percentage increase in output, it indicates decreasing returns to scale. This means that the cost per unit of output (average cost) will increase as output increases.

Engineers for the Off Road Skateboard Company Determine That a 12