Engineers for The Giffen Record Company determine that a 30% increase in all compact disc inputs will cause a larger 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) average costs to increase
B) average costs to decrease
C) average costs to remain constant
D) marginal costs to increase

Question

Quizplus · Accepted Answer

If a 30% increase in all compact disc inputs causes a larger percentage increase in output, it indicates increasing returns to scale. This means that as production scales up, the average cost of producing each unit decreases because the output increases by a larger proportion than the inputs.

Engineers for the Giffen Record Company Determine That a 30