A firm is said to operate with constant returns to scale if its input cost increases by four times when its output is doubled.

Question

Quizplus · Accepted Answer

A firm operates with constant returns to scale if its input costs increase proportionately less than the increase in output. In this case, the input cost increases by four times when output is doubled, which means it is exhibiting decreasing returns to scale.

A Firm Is Said to Operate with Constant Returns to Scale