Assume that constant returns to scale exists and that N and K both increase by 2%.Given this information,we know that
A)output (Y)will increase by 4%.
B)Y will increase by 2%.
C)Y will increase by less than 2%.
D)Y will increase by less than 4% and more than 2%.

Question

Quizplus · Accepted Answer

If there are constant returns to scale, then increasing both N and K by the same percentage (in this case, 2%) will result in a proportional increase in output (Y). So, if N and K both increase by 2%, then Y will also increase by 2%.

Assume That Constant Returns to Scale Exists and That N