Which of the following cases exhibit increasing returns to scale?
A)Output increases by 5 percent when inputs are increased by 6 percent.
B)Output increases by 6 percent when inputs are increased by 5 percent.
C)Output increases by 7 percent when inputs are increased by 7 percent.
D)Output declines by 2 percent when inputs are increased by 1 percent.

Question

Quizplus · Accepted Answer

Increasing returns to scale occur when the percentage increase in output is greater than the percentage increase in inputs, which is the case in option B where output increases by 6 percent with a 5 percent increase in inputs.

Which of the Following Cases Exhibit Increasing Returns to Scale