Assume a firm is using 6 units of capital and 6 units of labour to produce 6 baskets.Now it doubles both inputs resulting in a new total of 16 baskets being produced.This firm is experiencing
A)diseconomies of scale.
B)increasing costs.
C)decreasing returns to scale.
D)increasing returns to scale.
E)constant returns to scale.

Question

Quizplus · Accepted Answer

Doubling both inputs and resulting in the production of 16 baskets shows that the firm is experiencing increasing returns to scale. This means that the firm is able to achieve more output per unit of input as it increases its level of production.

Assume a Firm Is Using 6 Units of Capital and 6