Constant returns to scale occur when:
A)long-run average total costs are constant as output increases
B)marginal product of labour is falling
C)the firm's long-run average cost curve is falling as output increases
D)the firm's long-run average cost curve is rising as output increases

Question

Quizplus · Accepted Answer

Constant returns to scale occur when long-run average total costs are constant as output increases. This means that as a firm increases its production, it will not experience any change in its cost per unit of output. Therefore, the firm's cost per unit remains constant, and the firm is said to exhibit constant returns to scale.

Constant Returns to Scale Occur When