Author Question: How do constant returns to scale affect the shape of the long-run average cost curve? What will ... (Read 55 times)

Mr.Thesaxman · **on:** Jun 29, 2018

How do constant returns to scale affect the shape of the long-run average cost curve?

What will be an ideal response?

Question 2

Refer to Figure 19-10. Under the Bretton Woods System of exchange rates, if the par exchange rate was 2 per pound in the figure above, and equilibrium persisted at 3, then a revaluation of the currency would have

A) led to a balance of trade surplus.
B) increased the price of imports to Britain.
C) led to a current account surplus.
D) increased the price of British exports to the United States.

babybsemail · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

When the firm faces constant returns to scale, average costs per unit produced remain constant as the firm's scale of production rises. Thus, the long-run average cost curve would be horizontal.

Answer to Question 2

D