If a production function exhibits increasing returns to scale, a 10% increase in:
A)input- use results in a less than 10% increase.
B)the LMC being above LAC.
C)output requires a more than 10% increase in the input- use.
D)output results in a less than 10% increase in the input- use.

Question

Quizplus · Accepted Answer

Increasing returns to scale means that a proportional increase in all inputs leads to a greater proportional increase in output. Therefore, a 10% increase in input use would result in more than a 10% increase in output, implying that to achieve a 10% increase in output, less than a 10% increase in input use is required.

If a Production Function Exhibits Increasing Returns to Scale, a 10