The production function feature called "constant returns to scale" means that if we: A)multiply capital by z₁ and labour by z₂, we multiply output by z₃. B)increase capital and labour by 10 percent each, we increase output by 10 percent. C)increase capital and labour by 5 percent each, we increase output by 10 percent. D)increase capital by 10 percent and increase labour by 5 percent, we increase output by 7.5 percent.

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Quizplus · Accepted Answer

Constant returns to scale means that if all inputs are increased by a certain percentage, output increases by the same percentage.

The Production Function Feature Called "Constant Returns to Scale" Means