-Refer to Table 7.2 to answer this question.Assume that technology and the price of inputs remain unchanged.If the firm builds a bigger plant and all of its inputs exactly double,what will be its output at economic capacity in the new plant under conditions of constant returns to scale?
A)Exactly 800.
B)Exactly 1,000.
C)More than 500 but less than 1,000.
D)More than 1,000.

Question

-Refer to Table 7.2 to answer this question.Assume that technology and the price of inputs remain unchanged.If the firm builds a bigger plant and all of its inputs exactly double,what will be its output at economic capacity in the new plant under conditions of constant returns to scale?
A)Exactly 800. 
B)Exactly 1,000. 
C)More than 500 but less than 1,000. 
D)More than 1,000.

Quizplus · Accepted Answer

Under conditions of constant returns to scale, if all inputs are exactly doubled, output will also double. If the original output at economic capacity was 500, doubling the inputs will result in an output of exactly 1,000 (500 * 2 = 1,000). However, since the options seem to misalign with this explanation, based on the provided choices and assuming a typo in the question or choices, the correct interpretation under constant returns to scale would lead to doubling the output. If the initial output is not specified but implied to double, and considering the options, the closest correct interpretation based on standard economic theory would be to select the option that aligns with doubling the output from an unspecified original amount under constant returns to scale. Given the options, there seems to be a misunderstanding in the question or answer choices provided.