If constant returns to scale are present,
A)average total cost is decreasing.
B)average total cost is increasing.
C)the LRAC curve is horizontal.
D)the LRAC curve is downward sloping.
E)the LRAC curve is upward sloping.

Question

Quizplus · Accepted Answer

Constant returns to scale means that increasing all inputs results in a proportional increase in output. This leads to a horizontal LRAC curve because the cost per unit of output remains the same regardless of the scale of production. Therefore, Choice C is the correct answer.

If Constant Returns to Scale Are Present