Assume that a firm's total cost of producing an output of 300 units is currently $30,000.If output increases to 600 units,total cost increases to $60,000 and the price of inputs and technology remain unchanged,state whether constant returns to scale,economies of scale or diseconomies of scale exist in this case.
A)Economies of scale
B)Diseconomies of scale
C)Constant returns to scale
D)Increasing returns to scale

Question

Quizplus · Accepted Answer

Constant returns to scale exist in this case because the total cost doubles when the output doubles, indicating that the cost per unit remains the same as production scales up.

Assume That a Firm's Total Cost of Producing an Output