Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is
A) exploiting the economies of scale available to it.
B) facing constant returns to scale.
C) facing diseconomies of scale.
D) not using the available technology efficiently.

Question

Quizplus · Accepted Answer

When a firm doubles its output and the unit cost of production remains unchanged, it indicates that the firm is facing constant returns to scale. This means that the increase in inputs leads to a proportional increase in output, without changing the cost per unit.

Suppose a Firm Doubles Its Output in the Long Run