If long-run costs are plotted on the vertical axis and quantity of output plotted on the horizontal axis,a line that is perfectly horizontal implies:
A)constant returns to scale.
B)economies of scale.
C)diseconomies of scale.
D)inefficient use of capital.
E)inefficient use of labor.

Question

Quizplus · Accepted Answer

A perfectly horizontal line implies that increasing the quantity of output does not affect the long-run costs. This indicates that the firm has constant returns to scale, meaning that the factor inputs are being utilized in the same proportion regardless of the level of output.

If Long-Run Costs Are Plotted on the Vertical Axis and Quantity