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Production Function: TP, MP and AP · Question 58 of 62

Question 58

MediumOriginal question

Assertion (A): Constant returns to scale mean average cost stays the same as the firm grows, if input prices are fixed.
Reason (R): Under constant returns, doubling inputs and cost exactly doubles output.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Both are true, and R explains A: cost and output rise in the same proportion, so cost per unit is unchanged.

Concept: Returns to scale and average cost
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsReturns to scale

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