Gale Furniture uses labor, capital, and wood as inputs in its production of office desks. When Gale Furniture doubles the quantity of labor, capital, and wood, the quantity of office desks doubles. Gale Furniture’s production process is characterized by

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The question presents a production scenario where Gale Furniture uses labor, capital, and wood as inputs, and when all inputs are doubled, the output also doubles. This is a classic description used to classify returns to scale.
Option 1: 'decreasing returns to scale' would mean that doubling all inputs leads to less than a doubling of output. Since the statement in the prompt says output doubles when inputs double, this option contradicts the given behavior and is incorrect.
Option 2: 'increasing returns to scale' would imply that doubling all inputs leads to more than a doubling of output. The prompt does not show any output greater than double; it shows exactly double, so this choice mischaracterizes the production response and is incorrect.
Option 3: 'constant returns to scale' means that doubling all inputs results in a proportional doubling of output. The described scenario matches this perfectly, as output doubles when inputs double, so this option is consistent with the information provided.
Option 4: 'diseconomies of scale' refers to a situation where increases in scale lead to less than proportional increases in output, often due to coordination or inefficiency at larger sizes. The given example does not indicate any inefficiency or output less than double, making this option incorrect.
Option 5: 'economies of scale' generally describes a situation where increasing scale lowers average costs or enables greater output, but it’s a broader concept tied to cost or efficiency, not directly to the proportionality of input to output. While related in the broader sense, it does not specifically capture the precise input-output relationship described here as cleanly as 'constant returns to scale.' Therefore, this option is not the best match for the described scenario.
Thus, the option that aligns with doubling all inputs resulting in doubling the output is 'constant returns to scale'.

AP Economics-Hillebrand AP Microeconomics Sem 1 Exam 2025 - Requires Respondus LockDown Browser

Gale Furniture uses labor, capital, and wood as inputs in its production of office desks. When Gale Furniture doubles the quantity of labor, capital, and wood, the quantity of office desks doubles. Gale Furniture’s production process is characterized by

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AP Economics-Hillebrand AP Microeconomics Sem 1 Exam 2025 - Requires Respondus LockDown Browser

Gale Furniture uses labor, capital, and wood as inputs in its production of office desks. When Gale Furniture doubles the quantity of labor, capital, and wood, the quantity of office desks doubles. Gale Furniture’s production process is characterized by

View Explanation

Log in for full answers

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