If a firm builds a larger plant and its long-run average total cost does not change, the firm has constant returns to scale.False

Question

Quizplus · Accepted Answer

Constant returns to scale means that if all inputs are increased by the same percentage, output will increase by the same percentage. If a firm builds a larger plant and its long-run average total cost does not change, it implies that the firm will have the same level of efficiency with the larger plant as it had with the smaller plant. This means that if the firm were to increase all inputs by the same percentage, output would also increase by the same percentage, indicating constant returns to scale.

If a Firm Builds a Larger Plant and Its Long-Run