How do constant returns to scale affect the shape of the long-run ...

[Mr.Thesaxman]

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]

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

[Mr.Thesaxman]

Thanks for the timely response, appreciate it

[scottmt]

Great answer, keep it coming