Question

Undergraduates Total cost ($) 21,062,250 40,414,000 Students 2,750 5,500 8,250 11,000 13,750 16,500 Students 550 1,100 1,650 2,200 2,750 3,300 MC($) 7,259 6,548 5,838 5,125 4,417 3,706 MC($) 6,541 6,821 7,102 7,383 7,664 7,945 AC ($) 7,659 7,348 7,038 6,727 6,417 6,106 AC ($) 12,140 9,454 8,672 8,365 8,249 8,228 73,997,000 88,233,750 100,749,000 Total cost ($) 6,677,000 10,339,400 Graduates 18,403,000 22,684,750 27,152,400

The table (found in Exercise 7.3 in the textbook) above represents which of the following terms?

Group of answer choices

Increasing Returns to Scale

Decreasing Returns to Scale

Constant Returns to Scale

Network Economies of Scale

Answer 1

Answer : The answer is option A.

When production increase if average cost decrease then the firm face increasing returns to scale situation. Here for both undergraduates and graduates AC (Average Cost) decreases when the number of students increases. So, the given table shows the increasing returns to scale situation. Therefore, option A is correct.