Question

When a firm doubles its inputs and finds that its output has more than doubled,
this is known as:​

Answer 1

Answer:

When a firm doubles its inputs and finds that its output has more than doubled, this is known as economies of scale

Explanation:

This phenomenon occur when there is considerable cost saving along with increased production of the goods. The best example is Autocar maker, with higher production of vehicle, they are able to reduce cost of production thus higher profit for them. Objective is to reduce per unit cost with increased in production.

Answer 2

Note: The correct question must be provided with following options-

When a firm doubles its inputs and finds that its output has more than doubled,this is known as :​

A) economies of scale

B) constant returns to scale

C) diseconomies of scale

D) a violation of the law of diminishing returns

Explanation for correct option

A:

1. Economies of scale are benefits that can arise as a result of increasing the size of a business.
2. So, when a company doubles its inputs and discovers that its output has more than doubled, this is an advantage that occurred as a result of the company's increased inputs.

Explanation for incorrect option

B:

• A constant return to scale occurs when an increase in input results in an increase in output that is proportional to the increase in input.
• When the output increases in proportion to the increase in input, this is referred to as increasing returns to scale.
• The output is always in proportion to the input.

Thus, option B is incorrect.

C:

• Diseconomies of scale occur when a company or business grows to the point where its costs per unit increase.
• It occurs when a firm's economies of scale no longer function.

Thus, option C is incorrect.

D:

• The law of diminishing marginal returns is an economic theory that states that once an optimal level of capacity is reached, adding another factor of production will result in smaller increases in output.

Since, it results in only small increase in output, thus option D is also incorrect.

Hence, option A is correct.

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