A production function exhibits constant returns to scale if a twofold (threefold, etc.) increase in all inputs leads to a twofold (threefold, etc.) increase in output. For example, by doubling the use of capital and labor, the firm would exactly double its output.
a. What would the average and marginal cost curves look like under constant returns to scale? Explain.
b. Give an example of a production function that exhibits constant returns to scale.

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The Answer of A production function exhibits constant returns to scale if a twofold (threefold, etc.) increase in all inputs leads to a twofold (threefold, etc.) increase in output. For example, by doubling the use of capital and labor, the firm would exactly double its output.
a. What would the average and marginal cost curves look like under constant returns to scale? Explain.
b. Give an example of a production function that exhibits constant returns to scale.

A Production Function Exhibits Constant Returns to Scale If a Twofold