Which of the following contributes to the increasing returns to scale in production as a firm expands capacity?
A)Specialization of labor
B)Increase in average cost and decrease in output
C)Increase labor while keeping capital constant
D)Increase in marginal utility

Question

Quizplus · Accepted Answer

Specialization of labor is a common factor that contributes to increasing returns to scale in production. As a firm expands its capacity, it can divide tasks into smaller parts and assign them to specialized workers, which increases efficiency and productivity, leading to economies of scale. This can result in lower production costs and higher output. Increases in labor while keeping capital constant (C) and increases in marginal utility (D) do not necessarily contribute to increasing returns to scale, while the increase in average cost and decrease in output (B) would result in decreasing returns to scale.

Which of the Following Contributes to the Increasing Returns to Scale