CA Foundation P4 · Chapter 3 · Question 4 of 15
If all inputs are doubled and output increases three times, the firm is experiencing:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Increasing returns to scale
Explanation
Returns to scale refer to the long run when all inputs change in the same proportion. Output rising more than proportionately (3 times when inputs double) indicates increasing returns to scale. Diminishing returns to a factor is a short-run concept with at least one fixed input.
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