An agro-processing enterprise expands its production facility in the long run by increasin… — JAMB UTME

An agro-processing enterprise expands its production facility in the long run by increasing all of its input factors by $30\%$ . Consequently, its monthly output of processed cassava flour increases from $800\text{ bags}$ to $1,104\text{ bags}$ . What is the percentage increase in total output resulting from this scale expansion?

Answer: 38 %

Answer

The percentage increase in total output is 38%.

The absolute increase in output is

1,104 - 800 = 304\text{ bags}

. Expressing this increase as a percentage of the base output gives

\frac{304}{800} \times 100 = 38\%

. Because the output increase (

38\%

) exceeds the input increase (

30\%

), the firm experiences increasing returns to scale.

Step-by-Step Solution

Find the absolute change in total output.

Change in output =

1,104 - 800 = 304\text{ bags}

To calculate a percentage change, the absolute difference between final and initial quantities must first be established.

Divide the change in output by the initial output and express as a percentage.

Percentage increase =

\left(\frac{304}{800}\right) \times 100 = 38\%

Percentage change measures the relative expansion of output relative to the original baseline quantity.

Key Concept

Calculating Percentage Change in Output for Returns to Scale Analysis

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