Use the following statements to answer this question: I. We cannot measure the returns to scale for a fixed-proportion production function.
II) Production functions with inputs that are perfect substitutes always exhibit constant returns to scale.
A) I and II are true.
B) I is true and II is false.
C) II is true and I is false.
D) I and II are false.

Question

Quizplus · Accepted Answer

Statement I is false because returns to scale can be measured for a fixed-proportion production function by analyzing how output changes when all inputs are scaled. Statement II is false because production functions with perfect substitutes can exhibit increasing, constant, or decreasing returns to scale depending on the specific functional form and coefficients.

Use the Following Statements to Answer This Question: I