Suppose That a Firm's Output Increases from 500 to 600

question 53

Multiple Choice

Suppose that a firm's output increases from 500 to 600 units and its total cost increases from $50,000 to $72,000,and if the price of inputs and technology remain unchanged,calculate the change in average total cost and state whether constant returns to scale,economies of scale or diseconomies of scale exist in this case.

• A)Increase of $20 and economies of scale
• B)Increase of $20 and diseconomies of scale
• C)Increase of $20 and constant returns to scale
• D)No change and constant returns to scale

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