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10. Consider a firm that increases its inputs by 15 percent. For each scenario, state whether the firm experiences economies

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a) When a firm increases its inputs by 15% and the output is also increased by 15%, the firm experiences a constant returns to scale because the percentage increase in output is equal to the percentage increase in the inputs. In constant returns to scale the percentage increase  in the output is equal to the percentage increase  in the inputs.

b) When a firm increases its inputs by 15% and the outputs increase by less than 15%, the firm experiences a diseconomies of scale because the percentage increase in output is less than the percentage increase in the inputs. In diseconomies of scale the percentage increase in the output is less to the percentage increase in the inputs, which results in an increase in the average total cost.

c) a) When a firm increases its inputs by 15% and the outputs increase by more than 15%, the firm experiences a economies of scale because the percentage increase in output is more than the percentage increase in the inputs. In economies of scale the percentage increase  in the output is greater than the percentage increase  in the inputs, resulting in a lower average total cost.

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