Final answer:
The statement is false; 'constant returns to scale' refer to a segment of the long-run average cost curve where changing all input scales does not affect average production costs, not to horizontal short-run average total cost curves.
Step-by-step explanation:
The statement is false. "Constant returns to scale" does not refer to a situation in which a firm's short-run average total cost curves are horizontal. Instead, constant returns to scale occur in the context of the long-run average total cost curve. In a constant cost industry, such as agriculture, when market demand increases, the supply curve shifts right, and new firms enter the market without changing the market price. This happens because of a very elastic supply curve and perfectly elastic supply of inputs,meaning firms can hire more employees without increasing wages. In the middle portion of the long-run average cost (LRAC) curve where economies of scale have been exhausted, expanding all inputs does not significantly change average production costs, this range of output is where constant returns to scale are observed.