**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."

Production function, in financial matters, condition that communicates the connection between the amounts of useful elements (like worker and capital) utilized and the measure of item got. It can likewise be utilized to decide the least expensive mix of useful variables that can be utilized to create a given yield. FALSE, Because Assume that the production function has constant returns to scale. If the input group (z1, z2) is the ideal input pack to deliver the output y, then, at that point, for any constant a > 0, the information group (az1, az2) is the ideal info pack to create the output ay. Consequently the complete expense of producing ay is a times the total expense of producing y, so that the average cost of production is constant, free of yield. Essentially, in the event that the production function has diminishing return to scale, the average cost of production increments, and assuming the production function has expanding return to scale, the average cost of production falls.

Answered: a production function exhibits constant…

Business

Economics

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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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