Constant returns to scale indicate that a firm is experiencing:
A) per unit costs of production that are decreasing as the scale of output expands.
B) per unit costs of production that remain stable as the scale of output expands.
C) per unit costs of production that are increasing as the scale of output expands.
D) an increasing marginal product.

Question

Quizplus · Accepted Answer

Constant returns to scale means that as output (scale) expands, the increase in inputs used results in a proportional increase in outputs produced. This leads to a stable per unit cost of production, neither increasing nor decreasing.

Constant Returns to Scale Indicate That a Firm Is Experiencing