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JAMB Economics 1980 Question 27

Question 27

Theory of Costs and Revenue

If a firm doubles its output and its costs increase by 60%, the firm is experiencing

  1. A.increasing costs
  2. B.economies of scale
  3. C.decreasing returns
  4. D.decreasing costs
  5. E.none of the above.
Show the answer and explanation

Answer: B (economies of scale)

Explanation

Output rises by 100% while costs rise by only 60%, so cost per unit falls as the firm grows: economies of scale.