WAEC Economics 2020 Objective — Question 18

Question 18 of 50 from the West African Examinations Council (WAEC) Economics 2020 Objective paper, with the correct answer and a full explanation.

Increasing returns to scale suggests that

A. a firm can make profit by reducing output
B. a firm can make more profit by increasing outputCorrect
C. as the producer reduces the quantity of raw materials used, the marginal product will double
D. as the producer increases the quantity of raw materials used, the marginal product will fall

Explanation

Increasing returns to scale means that as output increases, cost per unit reduces; if the producer sells at the same price, more profit will be made by increasing output.

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