Consider the following statements regarding the Cost Elasticity of Output: Statement 1: It measures the percentage change in total cost for a 1% change in output, and a value less than one indicates economies of scale. Statement 2: When the value of the Cost Elasticity of Output is greater than one, the marginal cost is less than the average cost, signifying constant returns to scale. Which of the statements given above is/are correct?

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Economics · Cost Elasticity of Output

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

Statement 1 is true, but Statement 2 is false.

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Answer 1

Statement 1 is false, but Statement 2 is true.

Answer 2

Statement 1 is true, but Statement 2 is false.

Answer 3

Both statements are true.

Answer 4

Both statements are false.

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