An aircraft manufacturer doubles the amount of all of the inputs it uses-the factory doubles in size and twice as many workers are hired.After this expansion,the number of aircraft produced triples.If the price of inputs is unchanged,this means that aircraft manufacturer is operating with:
A) increasing marginal cost.
B) economies of scale.
C) increasing average total cost.
D) decreasing average variable cost.

Question

Quizplus · Accepted Answer

Doubling the inputs results in tripling the output, indicating economies of scale are being achieved. This means that the manufacturer is able to produce more output with the same level of resources, resulting in lower average costs of production. Therefore, the manufacturer is not experiencing increasing marginal cost or increasing average total cost, and it is not necessarily experiencing decreasing average variable cost.

An Aircraft Manufacturer Doubles the Amount of All of the Inputs