Asked by gabriela huselton on May 04, 2024
Verified
When a firm experiences constant returns to scale,
A) long-run average total cost is unchanged, even when output increases.
B) long-run marginal cost is greater than long-run average total cost.
C) long-run marginal cost is less than long-run average total cost.
D) the firm is experiencing coordination problems.
Constant Returns to Scale
A situation in production where increasing the input of all resources by any proportion yields an increase in output by the same proportion.
Long-run Average Total Cost
The per unit cost of production when all inputs, including capital, are variable, assuming optimal efficiency.
- Acquaint yourself with the notions of economies of scale, diseconomies of scale, and constant returns to scale.
Verified Answer
MP
Malinda PandukaMay 08, 2024
Final Answer :
A
Explanation :
Constant returns to scale imply that increasing all inputs by a certain percentage results in an increase in output by the same percentage, leading to unchanged long-run average total costs as output increases.
Learning Objectives
- Acquaint yourself with the notions of economies of scale, diseconomies of scale, and constant returns to scale.