Constant returns to scale occur when the firm's

Question

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Constant returns to scale means that as a firm increases its output by increasing all of its inputs proportionally, the long-run average total costs remain constant. This is represented by a flat long-run average cost curve. Option B correctly describes this scenario. Option A is incorrect as it only refers to the long-run total costs, not the average. Option C describes economies of scale, where the long-run average cost curve is falling as output increases. Option D describes diseconomies of scale, where the long-run average cost curve is rising as output increases.

Constant Returns to Scale Occur When the Firm's