Constant returns to scale cause the long-run average cost curve to be:
A) horizontal.
B) vertical.
C) upward-sloping.
D) downward-sloping.

Question

Quizplus · Accepted Answer

Constant returns to scale mean that when all inputs are increased by a certain proportion, output also increases by the same proportion. This means that the firm's expansion has no effect on its long-run average cost, resulting in a horizontal long-run average cost curve.

Constant Returns to Scale Cause the Long-Run Average Cost Curve