In the long run, a firm is said to be experiencing decreasing returns to scale if...
In the long run, a firm is said to be experiencing decreasing returns to scale if a 10 percent increase in inputs results in:
Select one:
a. an increase in output from 100 to 105.
b. an increase in output from 100 to 110.
c. a decrease in output from 100 to 85.
d. a decrease in output from 100 to 90.
Homework Answers
Answer
Option a
a. an increase in output from 100 to 105
The decreasing return to scale means the increase in output in less than an increase in input
For the first option, the increase is ((105-100)/100)*100=5%
for the second 10%
for the third and fourth it is negative which is not increase so te options are not considered.
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