Sesi uses capital and labor in the production of cakes. When Sesi doubled the capital and labor she used, she produced twice as many cakes.

What did Sesi experience?

Choose 1 answer:
(A) diminishing returns
(B) constant returns to scale
(C) decreasing returns to scale
(D) coordination costs
(E) increasing returns to scale

Question

Sesi uses capital and labor in the production of cakes. When Sesi doubled the capital and labor she used, she produced twice as many cakes.

What did Sesi experience?

Choose 1 answer:
(A) diminishing returns
(B) constant returns to scale
(C) decreasing returns to scale
(D) coordination costs
(E) increasing returns to scale

Accepted Answer

∻Solution∻ ‖ a ⋮ Understanding Returns to Scale: Returns to scale refer to how the output of a production process changes as all inputs are scaled up or down. ‖ ‖ b ⋮ Analyzing Sesi's Production: Sesi doubled her inputs (capital and labor) and produced twice as many cakes, which indicates a proportional increase in output relative to inputs. ‖ ∻Answer∻ ⚹ (B) constant returns to scale ⚹ ∻Key Concept∻ ⚹ Constant returns to scale ⚹ ∻Explanation∻ ⚹ When the proportionate increase in all inputs leads to an equal proportionate increase in output, the firm is experiencing constant returns to scale. In Sesi's case, doubling inputs to double output exemplifies this. ⚹◊What type of returns did Sesi experience in the production of cakes when she doubled capital and labor inputs?⍭ Generate me a similar question◊

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