Suppose General Motors could triple its production of Cavaliers by tripling its production facility for those cars. This is an example of

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The scenario asks us to interpret an outcome where tripling production of Cavaliers requires tripling the production facility, implying output increases at the same rate as input.
Option 1: 'Increasing returns to scale' would mean that doubling or tripling inputs leads to more than proportional increases in output. Since the problem states output increases proportionally with inputs, this option does not fit.
Option 2: 'Increasing economies of scale' is not a standard term in microeconomics; the closest standard concept is 'increasing returns to scale' or 'economies of scale' in a broader sense. The phrasing here incorrectly combines two ideas and mislabels the effect described.
Option 3: 'Constant returns to scale' describes a situation where inputs and outputs rise by the same proportion; if tripling the facility leads to triple the output, this matches constant returns to scale. The problem’s description aligns with this concept.
Option 4: 'Constant economies of scale' is an awkward and nonstandard phrase; while 'economies of scale' refers to cost advantages with larger scales, the term 'constant economies of scale' does not correspond to the described proportional relationship between inputs and outputs. This makes the option semantically incorrect.
In summary, the scenario depicts proportional growth between inputs and outputs, which is characteristic of constant returns to scale, while the other options either imply super-proportional increases, use nonstandard terminology, or misstate the relationship between scale and costs.

Suppose General Motors could triple its production of Cavaliers by tripling its production facility for those cars. This is an example of

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Suppose General Motors could triple its production of Cavaliers by tripling its production facility for those cars. This is an example of

View Explanation

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