What do constant returns to scale indicate that a firm is experiencing?
A) an increasing marginal product
B) per unit costs of production that are decreasing as the scale of output expands
C) per unit costs of production that remain stable as the scale of output expands
D) per unit costs of production that are increasing as the scale of output expands

Question

Quizplus · Accepted Answer

Constant returns to scale mean that when a firm increases its scale of production by increasing all inputs in the same proportion, the total output increases by the same proportion, while the per unit cost of production remains constant. Therefore, per unit costs of production remain stable as the scale of output expands.

What Do Constant Returns to Scale Indicate That a Firm