The table below shows the long-run total cost function of a firm

Economics May 08, 2021

The table below shows the long-run total cost function of a firm. Quantity of Output Total Cost ($) 00 1 10 2 20 3 30 440 5 50 The firm's cost function exhibits (A) diseconomies of scale (B) constant returns to scale (C) economies of scale (D) decreasing marginal cost f Fl increasing marginal cost

Expert Solution

Answer

(B)

Explanation

As we can see in the table shown in question that the proportion of input (total cost) increases is same to the increament in proportion of output. This is known as constant return to scale. So, the correct option is B "Constant Returns to Scale".

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