Constant returns to scale occur when
A)the marginal cost curve lies below the average cost curve.
B)the marginal cost curve is increasing at a decreasing rate.
C)an increase in all resources results in exactly proportionate increases in output.
D)the long-run average cost curve is declining.
E)an increase in all resources causes no change in output.

Question

Quizplus · Accepted Answer

Constant returns to scale occur when an increase in all resources results in exactly proportionate increases in output. This means that if all inputs are doubled, output will also double. There is no change in unit cost and production remains efficient. This is often represented graphically as a linear relationship between inputs and outputs.

Constant Returns to Scale Occur When