Suppose That a Firm,operating Efficiently,doubles the Size of Its Operations

question 50

Multiple Choice

Suppose that a firm,operating efficiently,doubles the size of its operations and discovers that,as a result,its average cost of production has increased.What does this imply?

• A)Decreasing returns to scale are present.
• B)Increasing returns to scale are present.
• C)Constant returns to scale are present.
• D)No conclusion about returns to scale can be made.

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Definitions:

Fund Returns

The profit or loss on an investment over a specific period, often expressed as a percentage of the investment's initial value.

Asset Allocation

Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon.

Information Ratio

A ratio used to measure the return of a portfolio or fund relative to its risk, often used to assess the skill of a portfolio manager.

Risk-Free Return

The theoretical return attributed to an investment with zero risk, typically associated with government bonds.