Asked by
Mikka Mantilla
on Dec 08, 2024
Verified
Mondo's Microbrewery is growing rapidly. As a result of achieving larger size, the firm realizes it needs to hire quite a few additional employees and upgrade its brewing and bottling equipment, which increases its average costs. The best explanation for these events is that Mondo's Microbrewery is experiencing ________ returns to scale.
A) increasing
B) constant
C) decreasing
D) first decreasing and then increasing
Decreasing Returns to Scale
Decreasing Returns to Scale occurs when a firm increases all inputs by a certain proportion, but the output increases by a smaller proportion, indicating reduced efficiency.
Average Costs
The total cost of production divided by the number of units produced, often used to assess efficiency and profitability.
- Compare and contrast economies of scale with diseconomies of scale.
Verified Answer
PA
Learning Objectives
- Compare and contrast economies of scale with diseconomies of scale.