Ulterior Votives is a firm in a perfectly competitive market that produces candles. Recently, it increased all of its inputs by $20 \%$ and output subsequently increased by $50 \%$.

What is this firm experiencing?

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

Question

Ulterior Votives is a firm in a perfectly competitive market that produces candles. Recently, it increased all of its inputs by $20 \%$ and output subsequently increased by $50 \%$.

What is this firm experiencing?

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

Accepted Answer

∻Solution∻ ‖ a ⋮ Returns to Scale: Returns to scale refers to how the output of a firm changes as all inputs change proportionately. ‖ ‖ b ⋮ Analysis of Given Information: Ulterior Votives increased all inputs by $20\%$ and observed an increase in output of $50\%$. This indicates that output increased by more than the proportional increase in inputs. ‖ ‖ c ⋮ Identification of Returns to Scale: Since the output increased by a greater percentage than the inputs, Ulterior Votives is experiencing increasing returns to scale. ‖ ∻Answer∻ ⚹ (D) increasing returns to scale ⚹ ∻Key Concept∻ ⚹ Increasing Returns to Scale ⚹ ∻Explanation∻ ⚹ When a firm's output increases by a greater percentage than the increase in inputs, it is experiencing increasing returns to scale. ⚹◊What is the formula to calculate returns to scale in production?⍭ Generate me a similar question◊

Sia