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:

Demand Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity demanded for it over a given period of time.

Marginal Product

Marginal product refers to the additional output produced as a result of adding one more unit of a specific input, while holding other inputs constant.

Resource

An economic or productive factor required to accomplish an activity, or as a means to undertake an enterprise and achieve desired outcome.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a resource, such as labor.