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a production function exhibits constant returns to scale, average cost will increase as output expands.

a production function exhibits constant returns to scale, average cost will increase as output expands.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Question:** If a production function exhibits constant returns to scale, average cost will increase as output expands. - ○ True - ○ False **Explanation:** In economic theory, if a production function has constant returns to scale, it means that increasing all inputs by a certain percentage results in an increase in output by the same percentage. This implies that the average cost remains constant as output expands, rather than increasing. Therefore, the correct answer is "False."
Transcribed Image Text:**Question:** If a production function exhibits constant returns to scale, average cost will increase as output expands. - ○ True - ○ False **Explanation:** In economic theory, if a production function has constant returns to scale, it means that increasing all inputs by a certain percentage results in an increase in output by the same percentage. This implies that the average cost remains constant as output expands, rather than increasing. Therefore, the correct answer is "False."
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