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Short Run Costs

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1. A firm experiences increasing returns to scale; that is, doubling all its inputs more than doubles its output. What can be inferred about the firm's short-run costs i.e. what is the connection between economies of scale and the short run average variable cost?

2. Which indicator(s) will always improve when more variables are added to a regression equation?

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Answer 1: If outputs are increasing more than the inputs, that means that the firm is enjoying economies of scale. The short ...

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