Question

"In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits"

Answer 1

Answer:

b. constant returns to scale because average total cost is constant as output rises.

Explanation:

The question has options. Below is the complete question.

Complete Question

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

a. diseconomies of scale because total cost is rising as output rises.

b. constant returns to scale because average total cost is constant as output rises.

c. diseconomies of scale because average total cost is rising as output rises.

d. economies of scale because average total cost is falling as output rises.

The correct answer is explained below.

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits  constant returns to scale because average total cost is constant as output rises.

Answer 2

Answer:

The answer is Constant returns to scale

Explanation:

Constant returns to scale is when a firm changes its inputs (labour or capital) and these changes lead to a proportionate increase or decrease in output. For example, when the total cost incurred to produce kayaks was $15,000, output was 30kayaks. The input to output ratio is 500(15,000÷30)

And when the total cost incurred to produce kayaks was increased to $20,000, output was 40kayaks. The input to output ratio is still 500(20,000÷40)