If Input Prices Are Constant, a Firm with Increasing Returns

question 107

Multiple Choice

If input prices are constant, a firm with increasing returns to scale can expect:

• A) costs to double as output doubles.
• B) costs to more than double as output doubles.
• C) costs to go up less than double as output doubles.
• D) to hire more and more labor for a given amount of capital, since marginal product increases.
• E) to never reach the point where the marginal product of labor is equal to the wage.

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Definitions:

Debit Side

The left side of an account or transaction, used to record increases in assets, expenses, and dividend accounts, and decreases in liability, equity, and revenue accounts.

Double-Entry Accounting

An accounting method where every financial transaction is recorded in at least two accounts: one with a debit and one with a credit.

Dual Effect

The principle in accounting that every transaction has a double impact on the financial statements, typically affecting at least two accounts.

Transaction

An agreement or communication carried out between parties to buy, sell, or exchange goods, services, or financial assets.