Final answer:
Doubling all inputs in a production function with constant returns to scale will double the output. This situation is characterized by the proportionate change in output to inputs, commonly seen in the middle of the LRAC curve and in constant cost industries like agriculture.
Step-by-step explanation:
If a production function exhibits constant returns to scale, then doubling all of the inputs will double the output. This means that the production function is characterized by the fact that an increase in all inputs by a certain percentage will result in an increase in output by the same percentage. This concept can be observed in the middle portion of the long-run average cost (LRAC) curve, specifically around the flat portion near Q3, where economies of scale have been reached, and further increasing the scale of production does not significantly change the average cost of production.
In a constant cost industry, such as the agriculture industry, when market demand and price increase and the supply curve shifts to the right with new firms entering the market, the new long-run equilibrium intersects at the same market price as before. This illustrates that firms in this type of industry can easily supply the quantity that consumers demand without changing the production costs much, due to the perfectly elastic supply of inputs.
Therefore, the correct answer to the student's question is: a. doubling all of the inputs doubles output. This is because, in the case of constant returns to scale, output changes in the same proportion as the change in inputs, without falling into the regions of diminishing marginal returns or diseconomies of scale.