Suppose a bakery is currently producing 1,500 loaves of bread per day using 20 workers and 80 units of capital.After hiring five more workers and twenty additional units of capital,the firm's output increases by 600 loaves per day.This change exhibits:
A)increasing marginal product of labor.
B)constant returns scale.
C)increasing returns to scale.
D)diminishing marginal product of labor.

Question

Quizplus · Accepted Answer

The firm's output increases by more than the proportional increase in inputs (both labor and capital), indicating increasing returns to scale.

Suppose a Bakery Is Currently Producing 1,500 Loaves of Bread