If a company doubles all its inputs and discovers that its output is more than...

JAMB 1978

If a company doubles all its inputs and discovers that its output is more than doubles, we can say that the company is experiencing

A. Increasing Marginal utility
B. Diseconomies of scale
C. Increasing costs
D. Constant returns to scale
E. Increasing returns to scale

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Correct Answer: Option E

Explanation

A company is said to be experiencing increasing returns to scale when the output increases by a larger proportion than the increase in inputs during the production process.

For example, if the input is increased by 3 times, but output increases by 3.75 times, then the firm or economy has experienced an increasing returns to scale.

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