A Detroit business advertises, "The more we sell, the lower the price, and the lower the price, the more we sell." This 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

This firm is experiencing increasing returns to scale. As they sell more, they are able to lower their prices, which leads to even more sales. This positive feedback loop is an example of increasing returns to scale.

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