When an Increase in the Firm's Output Reduces Its Long-Run

question 12

Multiple Choice

When an increase in the firm's output reduces its long-run average total cost,it has _____ returns to scale.

• A)increasing
• B)decreasing
• C)constant
• D)variable

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Definitions:

Increasing Returns

A situation in economics where an increase in the amount of inputs leads to a greater proportional increase in the amount of output.

Factor Endowments

The amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing and service provision.

Technology

The technical means for producing goods and services.

Heckscher-Ohlin Model

An economic theory that proposes countries will export products that utilize their abundant and cheap factors of production and import goods that require resources that are rare or expensive domestically.