A carpenter's shop doubles in size, buys twice the wood, hires a second carpenter, buys a second lathe, and then manages to produce 230% more furniture than it did before. The carpenter's shop is experiencing:

Question

Quizplus · Accepted Answer

The carpenter's shop has increased its inputs (doubled size, wood, and added a second carpenter and lathe) and has managed to produce more than double the amount of furniture it did before. This indicates that the shop is experiencing increasing returns to scale, as the increased inputs have resulted in a more than proportional increase in output.

A Carpenter's Shop Doubles in Size, Buys Twice the Wood