Question

If an industry is represented by a large number of small firms, the industry is likely to exhibit

Select one:

a. diseconomies of scale

b. economies of scope

c. constant returns to scale

d. economies of scale

Answer 1

If an industry is represented by a large number of small firms, the industry is likely to exhibit :

c. Constant returns to scale

Explanation - Large number of small firms represents a perfectly competitive market, whereby the prices of good and services are given. There are many substitutes of a particular commodity. Hence, it exhibits constant returns to scale, that is, a proportional rise in inputs will give equal proportional rise to its output.