When a firm is facing constant returns to scale,total costs will
A) decrease as the firm increases its output.
B) increase at a decreasing rate as the firm increases its output.
C) decrease at an increasing rate as the firm increases its output.
D) increase at an increasing rate as the firm increases its output.
E) increase proportionately to output.

Question

Quizplus · Accepted Answer

Constant returns to scale means that as the firm increases its output, its total costs will increase proportionately to output. Therefore, choice E is the best answer.

When a Firm Is Facing Constant Returns to Scale,total Costs