Assume a firm is using 10 units of capital and 10 units of labour and is producing 10 widgets per hour.Now it doubles both inputs,resulting in output of 30 widgets per hour.This firm is experiencing
A)decreasing returns to scale.
B)increasing returns to scale.
C)constant returns to scale.
D)diseconomies of scale.
E)increasing costs.

Question

Quizplus · Accepted Answer

When the inputs are doubled and the output is more than doubled, it indicates that the firm is experiencing increasing returns to scale. This is because the firm is able to take advantage of greater specialization, division of labour and economies of scale, thereby increasing productivity and profitability.

Assume a Firm Is Using 10 Units of Capital and 10