If all inputs are increased by 5 percent and output increases by 8 percent, then the
A) firm experiences constant returns to scale.
B) long-run average cost curve slopes downward.
C) long-run average cost curve shifts downward.
D) firm experiences diseconomies of scale.

Question

Quizplus · Accepted Answer

When inputs increase by 5% and output increases by 8%, the firm is experiencing increasing returns to scale, which means the long-run average cost curve slopes downward as costs per unit decrease with increased production.

If All Inputs Are Increased by 5 Percent and Output