Suppose That a Firm Increases Inputs by 10% and Observes

question 7

Multiple Choice

Suppose that a firm increases inputs by 10% and observes a 13% increase in output.If the prices of its inputs remain constant,then

• A) constant returns to scale are present.
• B) average cost decreases.
• C) total cost decreases.
• D) average cost is unchanged.
• E) average cost could be higher or lower.

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Definitions:

Energy Resource

Any natural or artificial substance or phenomenon that can be utilized to produce power, such as fossil fuels, solar, wind, or hydro power.

Oil And Gas

Natural resources that are extracted from the Earth and used primarily for energy and as raw materials in the production of chemicals.

Coal

A combustible black or brownish-black sedimentary rock formed from ancient plant matter, used primarily for electricity generation and steel production.

Oil Shale

Sedimentary rock that contains significant amounts of organic material in the form of kerogen, which can be converted into crude oil through heating.