Which of the following is most likely an example of constant returns to scale?
A) The per-unit costs of Excel Publishing Company's manuals fell after a large order was received from the government.
B) Alpha-Beta Inc. raised its price 10 percent after a 5 percent increase in production costs.
C) Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant.
D) The XYZ Co. increased production 25 percent and experienced a 30 percent increase in its total cost.

Question

Quizplus · Accepted Answer

Constant returns to scale occur when a firm's output increases by the same proportion as the increase in inputs. In option C, Widget Manufacturing doubled its production by opening a new plant identical to the old one, suggesting that the increase in output was proportional to the increase in inputs.

Which of the Following Is Most Likely an Example of Constant