### Increasing Returns to Scale: Analysis#### Question:Using the graph on the right, determine the output range over which increasing returns to scale occur:**Increasing returns to scale** occur over the output range:- A. beyond Q₃ only.- B. 0 to Q₃ only.- C. Q₁ to Q₂ only.- D. 0 to Q₂ only.- E. Q₂ to Q₃ only.#### Graph Explanation:The graph depicts cost curves in relation to output:- **Axes**: - Vertical axis represents cost. - Horizontal axis represents output.- **Curves**: - **SRATC₁ and SRATC₂** (Short-Run Average Total Cost curves) indicate different scales of production with different fixed resources. - **LRAC** (Long-Run Average Cost curve) illustrates the average cost per unit over a range of output levels when all inputs are variable.- **Points**: - **A, B, C** on the SRATC₁ curve highlight different output levels. - **D, E** on the LRAC curve indicate key points of analysis for scale.- **Output Levels**: - **Q₁, Q₂, Q₃**: Markers on the horizontal axis showing different production levels.The shape of the LRAC curve, which initially declines, suggests the presence of increasing returns to scale between points Q₁ and Q₂, as the average cost decreases with increased output in this range.

The technological relation between input and output is called the production function. The greatest…

Using the graph on the right, determine the output range over which increasing returns to scalo occur. Increasing returns to scale occur over the output range OA. beyond Q, only. OB. 0 to Q₂ only. OC. Q, to Q₂ only. OD. 0 to Q, only OE. Q, to Q, only 0₁ 0₂ SRATC, SRATC, LRAC Output

Using the graph on the right, determine the output range over which increasing returns to scalo occur. Increasing returns to scale occur over the output range OA. beyond Q, only. OB. 0 to Q₂ only. OC. Q, to Q₂ only. OD. 0 to Q, only OE. Q, to Q, only 0₁ 0₂ SRATC, SRATC, LRAC Output

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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