Constant Returns to Scale Refers to When

question 138

Multiple Choice

Constant returns to scale refers to 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 is true.

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Definitions:

Marginal Social Cost

The total cost to society of producing an additional unit of a good or service, including both the private costs and any external costs.

Market Price

The current rate at which a product or service is available for purchase or sale in an open market.

Congestion Fee

A congestion fee is a charge imposed on users of a crowded public goods, such as city roads or public transit systems, intended to reduce traffic congestion and improve air quality.

Internalize Costs

The process of ensuring that businesses or individuals take into account the external costs they impose on society in their decision-making.