The Assumption of Constant Returns to Capital Alone Implies That

question 45

Multiple Choice

The assumption of constant returns to capital alone implies that larger firms should be more efficient than smaller firms.The reason this doesn't necessarily imply a tendency toward monopolization is that

• A)most industries are perfectly competitive in nature
• B)firms have more inputs than just capital
• C)constant returns to capital alone still implies decreasing returns to all factors of production taken together
• D)if one firms increases its use of capital, other firms can also capture some of the production benefits of the new capital through spillover effects
• E)none of the above

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