If a Firm Increases All of Its Inputs by 10

question 291

Multiple Choice

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, then

• A)it is encountering diseconomies of scale.
• B)it is encountering economies of scale.
• C)the law of diminishing returns is taking hold.
• D)the firm's long-run ATC curve will be rising.

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Definitions:

Accounts Payable

Obligations owed by a company to its creditors or suppliers for goods and services received but not yet paid for.

Current Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets, indicating liquidity.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to run its day-to-day operations.

Current Liabilities

Obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.