If there are constant returns to scale, how is the production function written?
A) xY = 2 x A F(L, K, H, N)
B) Y/L = A F(xL, xK, xH, xN)
C) Y/L = A F( 1, K/L, H/L, N/L)
D) xL = A F(1,Y, K, H, N)

Question

Quizplus · Accepted Answer

Constant returns to scale mean that increasing all inputs by a certain factor will result in an equivalent increase in output. The production function for constant returns to scale is homogeneous of degree 1 in inputs. Choice C represents this property with all inputs being divided by L, and output being divided by L as well, resulting in a production function that is homogeneous of degree 1 in inputs.

If There Are Constant Returns to Scale, How Is the Production