Table 12-16
Listed in the table are the long-run total costs for three different firms.

-Refer to Table 12-16.Firm B is experiencing constant returns to scale.

Question

Table 12-16
Listed in the table are the long-run total costs for three different firms.
 
-Refer to Table 12-16.Firm B is experiencing constant returns to scale.

Quizplus · Accepted Answer

If a firm experiences constant returns to scale, its long-run total cost will increase proportionally as it increases all its inputs. Looking at the table, we can see that as the output level (Q) doubles from 10 to 20, the total cost (TC) also doubles from $100 to $200 for Firm B. This shows that the firm is experiencing constant returns to scale, and thus the answer is A.

Table 12-16 Listed in the Table Are the Long-Run Total Costs for Costs