Question

g If all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing Multiple Choice economies of scale. diseconomies of scale. constant returns to scale. decreasing average total costs.

Answer 1

Answer: The firm is experiencing diseconomies of scale.

Explanation:

In economics, diseconomies of scale are cost disadvantages that economic agents such as individuals, firms and governments accrue as a result of an increase in the output or organizational size resulting in the production of goods and services at an increased per-unit-costs.

Diseconomies of scale in businesses lead to an increase in the business average costs as the business grows. Regarding the question, while resources are increased by 10%, output increased by less than 5% shows diseconomies of scale since there's increase in the cost.