A Detroit business advertises, "The more we sell, the lower the price, and the lower the price, the more we sell." This statement implies that the firm is experiencing
A)decreasing returns to scale.
B)constant returns to scale.
C)increasing returns to scale.
D)abnormal demand patterns.

Question

Quizplus · Accepted Answer

The statement implies that the firm is experiencing increasing returns to scale, where increasing sales lead to a proportionately larger increase in profits due to economies of scale. As the price decreases, the demand for the product increases, leading to more sales and even lower prices, creating a self-reinforcing cycle.

A Detroit Business Advertises, "The More We Sell, the Lower