If a firm builds a larger plant and increases output and if its long-run average total cost does not change,the firm has constant returns to scale.

Question

Quizplus · Accepted Answer

If the long-run average total cost does not change with an increase in output, then the firm has constant returns to scale. This means that doubling inputs will exactly double output, while also keeping the cost per unit constant.

If a Firm Builds a Larger Plant and Increases Output