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Increasing returns to scale

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Suppose that a cost minimizing firm with two inputs, capital K and labour L recently increased the quantity of each inputs by 10%. As a result, output has increased from 1,000 to 1,200 units. For each of the following statement, indicate whether it is true, false,or uncertain and explain your answer.

a) When output is 1,000 units, there are increasing returns to scale

b) When output is 1,000 units, long-run average cost is downward sloping.

c) When output is 1,000 units, long-run marginal cost exceeds long-run average cost.

d) When output is 1,000 units, long-run marginal cost is downward sloping.

e) If the firm had increased the quantity of each input by 5%, output would increase from 1,000 to 1100 units.

Reference no: EM131457311

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