When an Increase in the Scale of Production Leads to Higher

question 112

Multiple Choice

When an increase in the scale of production leads to higher average costs, the industry exhibits

• A) diminishing returns.
• B) increasing returns to scale.
• C) decreasing returns to scale.
• D) constant returns to scale.

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Definitions:

Factor of Production

An input used in the production of goods or services, such as land, labor, capital, and entrepreneurship.

Competitive Market

A market structure characterized by many buyers and sellers, where no single entity can dictate the market price of the product or service.

Final Product

The last output of a production process, after all stages of production are completed.

Marginal Revenue Product Curve

A graphical representation showing how the extra revenue generated from employing one more unit of a resource changes as more of the resource is employed.