Figure 6.4.1
-In a production process, all inputs are increased by 10%; but output increases less than 10%. This means that the firm experiences:
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) negative returns to scale.

Question

Figure 6.4.1
-In a production process, all inputs are increased by 10%; but output increases less than 10%. This means that the firm experiences:
A) decreasing returns to scale. 
B) constant returns to scale. 
C) increasing returns to scale. 
D) negative returns to scale.

Quizplus · Accepted Answer

When all inputs are increased by 10% and output increases by less than 10%, the production process is experiencing decreasing returns to scale. This means that the firm is becoming less efficient as it expands its production.

Figure 6.4.1 -In a Production Process, All Inputs Are Increased by 10%;