Graph 13-4
This graph depicts average total cost functions for a firm that produces automobiles. Use the graph to answer the following question(s).
-Refer to Graph 13-4. This firm experiences constant returns to scale at which output levels?

Question

Graph 13-4
  This graph depicts average total cost functions for a firm that produces automobiles. Use the graph to answer the following question(s).
-Refer to Graph 13-4. This firm experiences constant returns to scale at which output levels?

Quizplus · Accepted Answer

The firm experiences constant returns to scale at output levels between M and N, as the slope of the average total cost curve remains constant in that range. At output levels below M and above N, the slope of the curve begins to steepen, indicating diseconomies of scale and decreasing returns to scale respectively. However, if the firm is operating in the long run, it may be able to adjust its inputs and technology to achieve constant returns to scale at all output levels.

Graph 13-4 This Graph Depicts Average Total Cost Functions for Functions