The table given below shows the average total cost of production of a firm at different levels of the output.Table 8.5

-If long-run costs are plotted on the vertical axis and the quantity of output is 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

The table given below shows the average total cost of production of a firm at different levels of the output.Table 8.5
 
-If long-run costs are plotted on the vertical axis and the quantity of output is 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.

Quizplus · Accepted Answer

A perfectly horizontal line represents constant returns to scale, which means that as the firm increases the quantity of output produced, the long-run average total cost remains constant. This indicates that the firm is able to maintain the same level of efficiency as it increases production.

The Table Given Below Shows the Average Total Cost of Production