A firm used to produce a product using three units of labor and one unit of capital. The firm discovers that it can produce more output at a lower cost if it combines two units of labor with two units of capital. This is an example of
A) an innovation.
B) an invention.
C) increasing returns.
D) economic growth.

Question

Quizplus · Accepted Answer

An innovation is a new idea, method or device that is introduced and brings about a change in the way things are done. In this case, the firm has discovered a new way to produce its product that is more efficient and cost-effective.

A Firm Used to Produce a Product Using Three Units