Question

Suppose a firm is producing in the long run. When it produces 4,000 units of output, its total cost is $8,000. When it produces 4,200 units of output, its total cost is $8,200, and when it produces 4,400 units of output, its total cost is $8,800.

Answer 1

The firm is experiencing Increasing then decreasing returns to scale.

What is returns to scale?

Returns to scale in economic measure change in productivity or an input that is required to produce a given unit of output.

Returns to scale means:

1. Increasing returns to scale is when output increases in a greater proportion than inputs.
2. Constant returns to scale is when output increases in the same proportion as inputs.
3. Decreasing returns to scale is when output increases in a lower proportion than inputs.

Production level    Total cost   Average total cost

4,000                       $8,000          $2.00

4,200                       $8,200           $1.95

4,400                       $8,800           $2.00

Hence, we can conclude from the above that the firm is experiencing Increasing then decreasing returns to scale.

Learn more about returns to scale here: https://brainly.com/question/972118