(Table: Long-Run Total Cost) Look at the table Long-Run Total Cost.Over what range of output does this soybean grower experience constant returns to scale?
A)the first and second bushels .
B)the third and fourth bushels .
C)the fourth and fifth bushels .
D)the fifth and sixth bushels

Question

(Table: Long-Run Total Cost) Look at the table Long-Run Total Cost.Over what range of output does this soybean grower experience constant returns to scale?
A)the first and second bushels . 
B)the third and fourth bushels . 
C)the fourth and fifth bushels . 
D)the fifth and sixth bushels

Quizplus · Accepted Answer

The soybean grower experiences constant returns to scale over the range of output from the third and fourth bushels. This is because the total cost increases from $170 to $200 when output increases from 2 to 3 bushels, and then again from $200 to $240 when output increases from 3 to 4 bushels. The increase in total cost from 2 to 3 bushels is $30, or 15%, while the increase in output from 2 to 3 bushels is also 15%. Similarly, the increase in total cost from 3 to 4 bushels is $40, or 20%, while the increase in output from 3 to 4 bushels is also 20%. Therefore, the soybean grower experiences constant returns to scale over the output range from the third and fourth bushels.

(Table: Long-Run Total Cost) Look at the Table Long-Run Total