Suppose a firm uses 200 units of capital and 1,000 workers to produce 10,000 uni

Question

Suppose a firm uses 200 units of capital and 1,000 workers to produce 10,000 units of output. When the firm employs 3,000 workers and uses 600 units of capital, output increases to 45,000 units. This firm exhibits: increasing returns to scale. decreasing returns to scale. constant returns to scale. diminishing marginal returns.
Suppose a firm uses 200 units of capital and 1,000 workers to produce 10,000 units of output. When the firm employs 3,000 workers and uses 600 units of capital, output increases to 45,000 units. This firm exhibits: increasing returns to scale. decreasing returns to scale. constant returns to scale. diminishing marginal returns.

Explanation / Answer

Increasing returns to scale.

Capital and labor increases 3 times but the output increases 4.5 times.

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