Question

Suppose you own a proftable tailoring company that hires two workers. The combined production of the two workers is ten shirts per day. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has increased to 22. This implies that your company is exhibiting:___________.

1. Decreasing returns to scale
2. Diminishing marginal product
3. Constant returns to scale
4, Economies of scale

Answer 1

4. Economies of scale

Step-by-step explanation:

In microeconomics, economies of scale are the cost advantages derived by an increased level of production.

When you decide to double the amount of capital and labor resulting in an increase in total number of shirts produced each day, this implies that your company is exhibiting Economies of scale.