Constant Returns to Scale    Yet another possibility is that, as size changes, average costs stay the same. This is known as Constant Returns to Scale (CRS) and would give rise to a horizontal LRAC, such as that shown to the right. Since LRMC below LRAC pulls average costs down, and LRMC above LRAC pulls average costs up, it must be the case here that LRMC = LRAC.

   Since no particular cost advantages arise from any specific sizein such an industry, we might expect to see firms of a wide variety of sizes.

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