For the production function Y = A • F(K,L) constant returns to scale means:
A)if capital and labour double output doubles.
B)capital and labour increase at a constant rate.
C)the marginal products of capital and labour are constant.
D)technology is constant.

Question

Quizplus · Accepted Answer

Constant returns to scale in a production function means that if all inputs (capital and labour in this case) are increased by a certain proportion, output increases by the same proportion. Doubling both capital and labor leading to a doubling of output is a direct example of constant returns to scale.

For the Production Function Y = a • F(K,L) Constant