Question

A decade ago, Nino decided to open a used car lot. This car lot required her to hire some sales agents and buy some computers to track the sales of the vehicles. After a few years, Nino opened up a second location and hired more sales agents and purchased more computers. When this expansion occurred, which of the following statements is FALSE?A. Fewer inputs and outputs were used.
B. More inputs were used.
C. Total possible output increased.
D. The business became inefficient during the expansion.
E. The production function changed.

Answer 1

Answer:

This two statements are false:

A. Fewer inputs and outputs were used.

This statement is false because the idea behind a business expansion is to use more inputs, in order to produce more output, however, for the expansion to be economically positive, the new output produced has to grow proportionally more than the additional input invested.

D. The business became inefficient during the expansion.

We do not know for sure whether the business became more inefficient or not, but it is more likely that it became more efficient after the expansion. Nino's business probably has managed to sell more cars after hiring the additonal workers, and buying the additional computers. This is the very definition of efficiency.