Figure 11-10 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc.
-Refer to Figure 11-10. Constant returns to scale

Question

Quizplus · Accepted Answer

Constant returns to scale are indicated by a flat or horizontal segment of the long-run average cost curve, suggesting that the cost per unit does not change with changes in output. This typically occurs within a specific range of output levels, in this case, between 10,000 and 20,000 picture frames per month, as that is where the scale of production neither advantages nor disadvantages the cost per unit.

Figure 11-10 Illustrates the Long-Run Average Cost Curve for a Firm