Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is Group of answer choices exploiting the economies of scale available to it. facing constant returns to scale not using the available technology efficiently. facing diseconomies of scale

Question

Business

Aron Olson

24 December, 03:59

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is Group of answer choices exploiting the economies of scale available to it. facing constant returns to scale not using the available technology efficiently. facing diseconomies of scale

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Brayan Chandler · Answer 1

Firm is exploiting Economies of Scale

Explanation:

Economies of Scale refers to the cost saving advantages (cost reduction), that firms experience due to increasing scale of production level.

Returns to scale just signifies that : when all inputs increase in same proportion; the output increase with - same proportion (constant returns), or lesser proportion (decreasing returns), or higher proportion (increasing returns).

In the given case : the inputs have not increased, the output has doubled. So, this illustrates Economies of scale. As, the firm has experienced cost advantages in production, simultaneous to increasing (doubling) production level.