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JAMB Economics 1978 Question 11

Question 11

Theory of Production

If a company doubles all its inputs and discovers that its output more than doubles, we can say that the company is experiencing

  1. A.increasing marginal utility
  2. B.diseconomies of scale
  3. C.increasing costs
  4. D.constant returns to scale
  5. E.increasing returns to scale.
Show the answer and explanation

Answer: E (increasing returns to scale.)

Explanation

When output rises by a bigger proportion than all inputs, the firm enjoys increasing returns to scale.