Suppose that a firm's output increases from 500 to 1,000 units and its total cost increases from $50,000 to $100,000,and if the price of inputs and technology remain unchanged,calculate the change in average total cost and state whether constant returns to scale,economies of scale or diseconomies of scale exist in this case.
A)Increase of $100 and economies of scale
B)Increase of $100 and diseconomies of scale
C)Increase of $100 and constant returns to scale
D)No change and constant returns to scale

Question

Quizplus · Accepted Answer

The average total cost remains the same ($100 per unit before and after the increase in output), indicating constant returns to scale.

Suppose That a Firm's Output Increases from 500 to 1,000