Asked by Icarpson Joseph on Mar 10, 2024
Verified
For constant returns to scale, a(n) ________ in a firm's scale of production leads to ________ average total cost.
A) increase; lower
B) increase; higher
C) decrease; a change in
D) decrease; no change in
A) increase; lower
B) increase; higher
C) decrease; a change in
D) decrease; no change in
Scale of Production
Refers to the size of the operation or the volume of output produced by a business or manufacturing plant.
Average Total Cost
Average Total Cost is the total cost of production divided by the total quantity produced, representing the per unit cost of production.
Returns to Scale
The change in output as a result of proportionately changing all inputs in the production process.
- Identify the differences between constant, increasing, and decreasing returns to scale.
Verified Answer
WM
William McBride
Mar 10, 2024
Final Answer :
D
Explanation :
For constant returns to scale, a decrease in a firm's scale of production leads to no change in average total cost, as costs change proportionally with output.
Learning Objectives
- Identify the differences between constant, increasing, and decreasing returns to scale.