Assume that with 20L and 30K a given firm can produce 100 units of output and with 40L and 60K it can produce 175 units (where L and K denote the labor and capital inputs). Based on this information, we can conclude that: a. decreasing returns to scale exist. b. average cost is decreasing. c. average cost is constant. d. increasing returns to scale exist.
Assume that with 20L and 30K a given firm can produce 100 units of output and with 40L and 60K it can produce 175 units (where L and K denote the labor and capital inputs). Based on this information, we can conclude that: a. decreasing returns to scale exist. b. average cost is decreasing. c. average cost is constant. d. increasing returns to scale exist.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume that with 20L and 30K a given firm can produce 100 units of output and with 40L and 60K it can produce 175 units (where L and K denote the labor and capital inputs). Based on this information, we can conclude that:
a. decreasing returns to scale exist.
b. average cost is decreasing.
c. average cost is constant.
d. increasing returns to scale exist.
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