What is a firm experiencing if it doubles all its inputs and this results in a tripling of output?

Choose 1 answer:
(A) Decreasing returns to scale
(B) Constant returns to scale
(C) Diseconomies of scale
(D) increasing returns to scale
(E) Minimum efficient scale

Question

What is a firm experiencing if it doubles all its inputs and this results in a tripling of output?

Choose 1 answer:
(A) Decreasing returns to scale
(B) Constant returns to scale
(C) Diseconomies of scale
(D) increasing returns to scale
(E) Minimum efficient scale

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Returns to Scale: Returns to scale refer to the changes in output resulting from a proportional change in all inputs. ‖ ‖ b ⋮ Increasing Returns to Scale: If a firm doubles all its inputs and the output more than doubles (in this case, triples), it is experiencing increasing returns to scale. ‖ ∻Answer∻ ⚹ (D) Increasing returns to scale ⚹ ∻Key Concept∻ ⚹ Increasing Returns to Scale ⚹ ∻Explanation∻ ⚹ When a firm doubles its inputs and the output triples, it indicates that the firm is experiencing increasing returns to scale. This means that the output increases by a greater proportion than the increase in inputs. ⚹◊What impact would doubling all inputs and resulting in a tripling of output have on the firm's production function in terms of returns to scale (either increasing, constant, or decreasing)?⍭ Generate me a similar question◊

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