In the production function Y = f(K,NA),for a given state of technology,constant returns to scale implies that output (Y)will increase by 7% when
A)K or NA increase by 7%.
B)K and N increase by 7%.
C)N or A increase by 7%.
D)N and A increase by 7%.
E) all of the above

Question

Quizplus · Accepted Answer

Constant returns to scale means that if all inputs are increased by a certain percentage, output will increase by the same percentage. Therefore, if both K (capital) and N (labor) increase by 7%, output Y will also increase by 7%.

In the Production Function Y = F(K,NA),for a Given State