One Reason That Firms Will Experience Increasing Returns to Scale

question 60

Multiple Choice

One reason that firms will experience increasing returns to scale is:

• A) the law of diminishing marginal returns.
• B) the specialization of inputs as scale increases.
• C) there is some fixed input that isn't being taken into consideration.
• D) large firms may be difficult to manage effectively.

---

Definitions:

R&D

R&D stands for research and development, the process of investing time and capital in developing new products, processes, or services, or improving existing ones.

Competitive Industries

Industries in which multiple firms compete, often characterized by high levels of competition which drive innovation and efficiency.

Fast-Second Strategy

Fast-Second Strategy is a business approach where a company quickly follows innovators, improving upon their innovations or successfully commercializing them.

Dominant Firm

A company that has a large market share within its industry, giving it significant market power and the ability to influence market conditions.