Suppose That a Firm's Output Increases from 500 to 1,000

question 92

Multiple Choice

Suppose that a firm's output increases from 500 to 1,000 units and its total cost increases from $50,000 to $100,000,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 $100 and economies of scale
• B)Increase of $100 and diseconomies of scale
• C)Increase of $100 and constant returns to scale
• D)No change and constant returns to scale

---

Definitions:

Models

Representations, often simplified or idealized, used to explain, predict, or simulate complex systems or behaviors.

Real-world Concerns

Issues or problems that affect individuals, communities, or societies in practical, everyday life rather than theoretical contexts.

Negative Reinforcement

A behavioral principle where the removal of an unpleasant stimulus following a behavior makes the behavior more likely to occur in the future.

Punishment

A consequence that follows an undesirable behavior, with the intention of decreasing or eliminating that behavior.