Constant Returns to Scale Occur When

question 102

Multiple Choice

Constant returns to scale occur when:

• A)an increase in the quantity of output decreases average total cost in the long run.
• B)an increase in the quantity of output increases average total cost in the long run.
• C)average total cost does not depend on the quantity of output in the long run.
• D)None of these are correct.

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Definitions:

Money Supply

The Money Supply is the total amount of monetary assets available in an economy at any specific time, including cash, coins, and balances held in checking and savings accounts.

Interest Rates

The expense incurred when taking out a loan, usually shown as a percent of the total amount loaned.

Federal Funds Market

A U.S. financial market allowing banks to borrow and lend excess reserves to each other, usually overnight, at an interest rate called the federal funds rate.

Discount Window

The discount window is a central banking facility that allows financial institutions to borrow reserves, usually short-term, at a predetermined interest rate, to maintain liquidity.