A business whose only inputs are labour and capital expands its employment level in the long run from 12 to 18 workers and its capital from 4 to 6 machines.Write out dollars and cents, e.g. $1.00 or $0.10 for any monetary amounts entered as a solution below.

Assuming that the daily wage of $100 and the daily upkeep (including wear and tear) per machine of $20 remain constant in the long run, identify the relevant returns to scale and the change in long-run average cost if daily output were to expand in each of the following possible ways.

a. If daily output expands from 100 to 200 units then in this output range the business is experiencing

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constant

decreasing

increasing

returns to scale while long-run average cost is

(Click to select)

falling

rising

staying the same

. At 100 units long-run average cost is $and at 200 units it is $.

b. If daily output expands from 100 to 150 units then in this output range the business is experiencing

(Click to select)

constant

decreasing

increasing

returns to scale while long-run average cost is

(Click to select)

falling

rising

staying the same

. At 100 units long-run average cost is $and at 150 units it is $.

c. If daily output expands from 100 to 133 units then in this output range the business is experiencing

(Click to select)

constant

decreasing

increasing

returns to scale while long-run average cost is

(Click to select)

falling

rising

staying the same

. At 100 units long-run average cost is $and at 133 units it is $.