Constant returns to scale implies that if N and K both increase by 3% that
A)output (Y)will increase by 3%.
B)Y / N will increase by 3%.
C)Y / N will increase by less than 3%.
D)the capital-labor ratio will increase by 3%.

Question

Quizplus · Accepted Answer

Constant returns to scale means that if all inputs are increased by the same percentage, then output will also increase by the same percentage. Therefore, if both N and K increase by 3%, output Y will also increase by 3%.

Constant Returns to Scale Implies That If N and K