13. Is the firm’s expansion path always a straight line No. If the firm always uses capital and labor in the same proportion, the long run expansion path is a straight line. But if the optimal capital-labor ratio changes as output is increased, the expansion path is not a straight line. 14. What is the difference between economies of scale and returns to scale Economies of scale depend on the relationship between cost and output—i.e., how does cost change when output is doubled Returns to scale depend on what happens to output when all inputs are doubled. The difference is that economies of scale reflect input proportions that change optimally as output is increased, while returns to scale are based on fixed input proportions (such as two units of labor for every unit of capital) as output increases.
