Managerial Economics and Organizational Architecture in Major Plants
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The Xerox Corporation has 3 major plants A, B, C in the United States. At each plant management quadrupled the inputs in an effort to increase output. Given that increasing returns to scale would mean if you doubled the inputs you more than doubled the output; decreasing returns to scale would mean that if you doubled the inputs and less than doubled the output; constant returns to scale would mean that you doubled the inputs but only doubled the output; At Plant A the output doubled, at Plant B the output increased 4 fold and at Plant C the output increased five fold.
For each plant what type of returns to scale was experienced? What conclusions could you make about the performance of Plant C?
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Solution Summary
Provides steps necessary to determine the type of returns to scale was experienced and what conclusions can be made about the performance of Plant C.
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Plant A: Decreasing returns to scale (when inputs is quadrupled, output is less than quadrupled).
Plant B: Constant return to scale - ...
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