If the Firms in a Market Have Constant Returns to Scale

question 2

Multiple Choice

If the firms in a market have constant returns to scale internally while there are external economies of scale for the industry, a firm's long-run supply curve will be ________ and the long-run market supply curve will be ________.

• A) downward sloping; downward sloping
• B) upward sloping; horizontal
• C) horizontal; downward sloping
• D) downward sloping; horizontal
• E) upward sloping; downward sloping

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Definitions:

Economic Concept

A theory or principle that forms the basis of economic reasoning and decision making.

Corn

A cereal plant that yields large grains, or kernels, set in rows on a cob, widely grown for food, feed, and as a raw material for various products.

Government Intervention

Actions taken by a government to influence or regulate various activities within its economy, typically to correct market failures and promote economic welfare.

Efficiency

The extent to which resources are used in the most effective way to produce goods and services while minimizing waste and costs.