If a Firm Increases All of Its Inputs by 10

question 208

Multiple Choice

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then

• A) it is encountering diseconomies of scale.
• B) it is encountering economies of scale.
• C) it is encountering constant returns to scale.
• D) the marginal products of all inputs are falling.

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Definitions:

Price Ceiling

A legally established maximum price for a good, or service. Normally set at a price below the equilibrium price.

Legal Price

A price set by law or regulation, typically to prevent prices from being too high or too low in a market.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, resulting in a stable market condition.

Commodity X

A placeholder name used to denote a specific, but unspecified, item in economic models and discussions.