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 exist when the long-run average cost (LRAC) curve is flat. This occurs when the LRAC curve intersects each of the short-run average cost curves at their respective minimum points. In Exhibit 6-14, the LRAC curve is flat between the output levels of 2,000 and 3,000, indicating constant returns to scale. Beyond this range, the LRAC curve starts to slope upwards, indicating decreasing returns to scale. Therefore, the best choice is C) 2,000 and 3,000.

Exhibit 6-14 Cost Curves