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:

Marginal Benefits

The boost in satisfaction or usefulness derived from the consumption of an additional unit of a good or service.

Rational Individuals

People who make decisions by logically evaluating options based on their preferences and the likely outcomes to maximize their benefit or utility.

Production Possibilities Curve

A graphical representation that shows the maximum quantity of two products that can be produced within a given set of resources, highlighting the trade-offs and opportunity costs.

Confusion

A lack of understanding or clarity about a situation, concept, or instruction.