Buffalo Aircraft doubles the amount of all of the inputs it uses-the factory doubles in size and twice as many workers are hired.After this expansion, the number of aircraft produced triples.This means that Buffalo Aircraft is operating with:
A)increasing marginal cost.
B)economies of scale.
C)increasing average total cost.
D)decreasing average variable cost.

Question

Quizplus · Accepted Answer

The fact that the number of aircraft produced triples after the expansion indicates that Buffalo Aircraft is experiencing economies of scale. This means that as the company increases its production levels, its average cost of production decreases.

Buffalo Aircraft Doubles the Amount of All of the Inputs