Which Scenario Below Would Lead to Lower Profits as We

question 101

Multiple Choice

Which scenario below would lead to lower profits as we double the inputs used by the firm?

• A) Increasing returns to scale with constant input prices
• B) Constant returns to scale with constant input prices
• C) Constant returns to scale with rising input prices (perhaps because the firm is not a price-taker in the input markets)
• D) all of the above

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Definitions:

Finished Goods

Products that are finished with the production process but remain unsold to any customer.

Total Manufacturing Costs

The sum of all costs directly associated with the production of goods, including raw materials, labor, and overhead expenses.

Raw Material

Material that is to be processed into a finished product or that changes the quality or characteristics of the product.

Direct Labor Cost

The total cost of all labor hours that are directly involved in the production of goods or the provision of services.