What does the property of constant returns to scale imply for long-run average total costs?

The property of constant returns to scale indicates that if all inputs in the production process are increased by the same proportion, the output will increase by that same proportion. For example, if a firm doubles its inputs, its output will also double.

In the context of long-run average total costs, this means that as quantity of output changes—specifically, when output is increased—average total costs will remain unchanged. This stability in costs arises because the efficiencies gained from scaling do not lead to either an increase or a decrease in costs per unit of output; the cost structure is balanced as the scale of operation expands.

Thus, under constant returns to scale, the long-run average total cost curve is horizontal, which reflects this behavior: no matter how much the firm produces, the average cost per unit stays the same. This is fundamental in understanding production theory and helps firms make long-term decisions about scaling production effectively.