Exhibit 6 -14 Cost curves

In Exhibit 6-14, constant returns to scale only exist for output levels between:

Question

Exhibit 6 -14 Cost curves

In Exhibit 6-14, constant returns to scale only exist for output levels between:

Quizplus · Accepted Answer

Constant returns to scale means that when inputs are increased in proportion, output also increases in the same proportion. In Exhibit 6-14, constant returns to scale exist when the long-run average cost (LRAC) curve is a straight line. This occurs between output levels of 2,000 and 3,000. Below 2,000, the LRAC curve slopes downwards, indicating decreasing returns to scale, and above 3,000, it slopes upwards, indicating increasing returns to scale. Therefore, the correct answer is C, 2,000 and 3,000.

Exhibit 6 -14 Cost Curves