A firm's production process shows constant returns to scale.It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at an average cost of
A)$10,000.
B)$5,000.
C)$2,000.
D)$0.50.

Question

Quizplus · Accepted Answer

With constant returns to scale, the average cost remains the same as output increases. The average cost for 5,000 widgets is $2,500/5,000 = $0.50 per widget, so for 10,000 widgets, it remains $0.50 per widget.

A Firm's Production Process Shows Constant Returns to Scale