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:

Overhead

Overhead refers to ongoing business expenses not directly attributed to the production of goods or services, such as rent, utilities, and administrative costs.

Production Department

The division of a business focused on the creation and manufacture of goods.

Manufacturing Processes

A series of steps or operations used to transform raw materials into finished goods through physical, chemical, or mechanical measures.

Plantwide Factory Overhead Rate

A single overhead absorption rate used throughout an entire plant or factory to allocate indirect costs to products uniformly.