If a Firm Experiences Constant Returns to Scale at All

question 145

Multiple Choice

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

• A)slope downward.
• B)be horizontal.
• C)slope upward.
• D)slope downward for low output levels and upward for high output levels.

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Definitions:

Normal Good

A Normal Good is a type of good for which demand increases when income increases, and vice versa, holding all other factors constant.

Income Effect

The alteration in the income of a person or an economy and its impact on the demand for a particular good or service.

Leisure

The time available for ease and relaxation where no work is done, often considered as time spent away from business, work, job hunting, domestic chores, and education.

Workers' Incomes

The financial compensation received by employees for their labor, including wages, salaries, and bonuses.