A production function with constant returns to scale for capital alone implies that
A)there are increasing returns to scale for all factors of production taken together
B)if all inputs are doubled then output will more than double
C)smaller firms are more efficient than larger firms
D)technological advances cannot take place
E)both A and B

Question

Quizplus · Accepted Answer

A production function with constant returns to scale for capital alone does not imply increasing returns to scale for all factors of production taken together or that smaller firms are more efficient than larger firms. It also does not imply that technological advances cannot take place. The misunderstanding might stem from misinterpreting the concept of constant returns to scale, which refers to a proportional increase in output resulting from a proportional increase in all inputs. However, the question specifically mentions constant returns to scale for capital alone, which does not directly lead to the conclusions presented in options A, C, and D. Therefore, the correct answer should focus on the implications of constant returns to scale in a broader sense, not limited to capital alone, which was not accurately reflected in the provided explanation.

A Production Function with Constant Returns to Scale for Capital