CFA Practice Question

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CFA Practice Question

Constant returns to scale ______

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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