Can there be constant returns to scale in an industry with an upward-sloping supply curve?

Explain. Constant returns to scale with an upward-sloping long-run industry supply curve

A. are possible because proportional increases in inputs yielding the same proportional increase in output may induce higher input prices.

B. are possible because proportional increases in inputs yielding greater thangreater than proportional increases in output may induce higher input prices.

C. are not possible because proportional increases in inputs will only yield the same proportional increase in output if input prices remain constantinput prices remain constant.

D. are possible because proportional increases in inputs yielding the same proportional increase in output may induce lower input prices.

E. are not possible because proportional increases in inputs yielding the same proportional increase in output will induce lower input prices.

Question

Akira Mckee

Business

31 October, 01:24

Can there be constant returns to scale in an industry with an upward-sloping supply curve?

Explain. Constant returns to scale with an upward-sloping long-run industry supply curve

A. are possible because proportional increases in inputs yielding the same proportional increase in output may induce higher input prices.

B. are possible because proportional increases in inputs yielding greater thangreater than proportional increases in output may induce higher input prices.

C. are not possible because proportional increases in inputs will only yield the same proportional increase in output if input prices remain constantinput prices remain constant.

D. are possible because proportional increases in inputs yielding the same proportional increase in output may induce lower input prices.

E. are not possible because proportional increases in inputs yielding the same proportional increase in output will induce lower input prices.

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Answers (1)

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Jovanny Conley · Answer 1

A) are possible because proportional increases in inputs yielding the same proportional increase in output may induce higher input prices.

Explanation:

Constant returns to scale mean that any proportional increase in inputs will result in an equally proportional increase in outputs.

The price of inputs might also rise because their supply curves are also upward sloping. This would result in an increasing cost industry, that will have an upward sloping long run supply curve.

So an industry can have constant returns to scale and upward sloping supply curve.