Engineers for the All-Terrain Bike Company have determined that a 15% increase in all inputs will cause a 15% increase in output Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases?
Correct answer: A. average costs to remain constant
- A. average costs to remain constant
- B. average costs to decrease
- C. average costs to increase
- D. marginal costs to increase
Explanation
A 15% increase in every input producing a 15% increase in output indicates constant returns to scale. With input prices unchanged, total cost and output rise proportionately, so average cost remains constant.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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