Rahim owns a candy factory.If he decided to expand the size of his factory so that he could make more candy,how would he know if he is experiencing constant returns to scale?

Question

Quizplus · Accepted Answer

Constant returns to scale occur when a firm increases its inputs proportionally and sees no change in the long-run average cost of making each unit of output. This means that the cost per unit of output remains the same despite the increase in the size of the factory. Therefore, if Rahim experiences no change in the long-run average cost of making each piece of candy, he is experiencing constant returns to scale. Option A is the only choice that describes constant returns to scale.

Rahim Owns a Candy Factory