Below are some cost data pertaining to Plant 1,which has total fixed costs of $1,000.Suppose that Plant 2 is exactly twice the size of Plant 1 while using (at economic capacity)twice the amount of labour and materials,and that it produces exactly twice the output.Further,assume that the prices of these inputs do not change.

-Refer to the information above to answer this question.What comment can be made in reference to returns to scale between Plants 1 and 2?
A)Constant returns to scale are present.
B)Increasing returns to scale are present.
C)Decreasing returns to scale are present.
D)Diminishing marginal returns are present.

Question

Below are some cost data pertaining to Plant 1,which has total fixed costs of $1,000.Suppose that Plant 2 is exactly twice the size of Plant 1 while using (at economic capacity)twice the amount of labour and materials,and that it produces exactly twice the output.Further,assume that the prices of these inputs do not change.
 
-Refer to the information above to answer this question.What comment can be made in reference to returns to scale between Plants 1 and 2?
A)Constant returns to scale are present. 
B)Increasing returns to scale are present. 
C)Decreasing returns to scale are present. 
D)Diminishing marginal returns are present.

Quizplus · Accepted Answer

Constant returns to scale are present because doubling the inputs doubles the output.

Below Are Some Cost Data Pertaining to Plant 1,which Has