Below is short-run cost data for four different plant sizes.Plant 2 has exactly twice as many inputs as does Plant 1.Plant 3 has exactly three times as many inputs as does Plant 1 and Plant 4 has exactly four times as many inputs as does Plant 1.

-Refer to the information above to answer this question.Given the cost data above,which of the following statements is correct?
A)This firm experiences constant returns to scale.
B)This firm experiences increasing returns to scale.
C)This firm experiences decreasing returns to scale.
D)This firm experiences constant,increasing and decreasing returns to scale.
E)No comment about returns to scale can be made.

Question

Below is short-run cost data for four different plant sizes.Plant 2 has exactly twice as many inputs as does Plant 1.Plant 3 has exactly three times as many inputs as does Plant 1 and Plant 4 has exactly four times as many inputs as does Plant 1.
 
-Refer to the information above to answer this question.Given the cost data above,which of the following statements is correct?
A)This firm experiences constant returns to scale. 
B)This firm experiences increasing returns to scale. 
C)This firm experiences decreasing returns to scale. 
D)This firm experiences constant,increasing and decreasing returns to scale. 
E)No comment about returns to scale can be made.

Quizplus · Accepted Answer

This firm experiences constant returns to scale because the output increases in the same proportion as the inputs.

Below Is Short-Run Cost Data for Four Different Plant Sizes