Pie Claudius is a firm that produces and sells bean pies. Recently it increased its inputs by $60 \%$ and output increased by $60 \%$.

What did this firm experience?

Choose 1 answer:
(A) decreasing returns to scale
(B) economies of scale
(C) constant returns to scale
(D) diseconomies of scale
(E) increasing returns to scale

Question

Pie Claudius is a firm that produces and sells bean pies. Recently it increased its inputs by $60 \%$ and output increased by $60 \%$.

What did this firm experience?

Choose 1 answer:
(A) decreasing returns to scale
(B) economies of scale
(C) constant returns to scale
(D) diseconomies of scale
(E) increasing returns to scale

Accepted Answer

∻Solution∻ ‖ a ⋮ Returns to Scale: Returns to scale refer to how the output of a firm changes as all inputs change proportionately. ‖ ‖ b ⋮ Analysis of Given Scenario: If a firm increases all inputs by a certain percentage and the output increases by the same percentage, the firm is experiencing constant returns to scale. ‖ ∻Answer∻ ⚹ C. constant returns to scale ⚹ ∻Key Concept∻ ⚹ Constant Returns to Scale ⚹ ∻Explanation∻ ⚹ When a firm's output increases by the same percentage as the increase in inputs, it is experiencing constant returns to scale. This is indicative of a proportional relationship between input and output levels. ⚹◊What is the formula to calculate returns to scale in production when inputs are increased by a certain percentage?⍭ Generate me a similar question◊

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