Asked by Marion Linden on Sep 24, 2024
Verified
If long run average costs are constant with respect to output,you have
A) Increasing returns to scale
B) Decreasing returns to scale
C) Constant returns to scale
D) None of the above
Constant Returns To Scale
When average costs are constant with respect to output level.
- Understand the importance of returns to scale in influencing long-term costs.
Verified Answer
MM
Matthew McMeansabout 6 hours ago
Final Answer :
C
Explanation :
If long run average costs are constant with respect to output, then it implies that a proportional increase in all inputs would lead to the same proportional increase in output, and hence, the cost per unit of output would remain the same. This is characteristic of constant returns to scale. Therefore, option C is the correct answer. Options A and B refer to increasing and decreasing returns to scale, respectively, where the long-run average costs vary with output. Option D is incorrect as it is a general statement and does not relate to the specific scenario described in the question.
Learning Objectives
- Understand the importance of returns to scale in influencing long-term costs.
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