- CFA Exams
- CFA Exam: Level I 2021
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 8. Understanding Economies and Diseconomies of Scale
CFA Practice Question
Constant returns to scale ______
B. refers to the downward-sloping portion of the long-run ATC curve.
C. means long-run average total costs do not change with an increase in output.
A. refers to the upward-sloping portion of the long-run ATC curve.
B. refers to the downward-sloping portion of the long-run ATC curve.
C. means long-run average total costs do not change with an increase in output.
Correct Answer: C
Constant returns to scale refers to the flat portion of the LRATC curve where long-run average total costs remain constant when output increases.
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