If the percentage increase in a firm's output is higher than the percentage increase in all of its inputs, then:
A) diminishing marginal returns have begun.
B) the firm is employing the least cost combination of inputs.
C) returns to scale are constant.
D) returns to scale are increasing.
E) returns to scale are decreasing.

Question

Quizplus · Accepted Answer

If the percentage increase in output is higher than the percentage increase in inputs, it indicates increasing returns to scale. This means that a percentage increase in inputs leads to a higher percentage increase in output.

If the Percentage Increase in a Firm's Output Is Higher