Neoclassical growth theory is based on the assumption of marginal returns to a single factor and
Returns to scale exhibited by the aggregate production function.

Question

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Neoclassical growth theory is based on the assumption of decreasing marginal returns to a single factor and constant returns to scale exhibited by the aggregate production function. This means that as more and more of a single input (like labor) is added to the production process, the additional output gained from each additional unit of that input decreases. However, if all inputs (like labor and capital) are increased proportionally, then the output will increase proportionally as well.

Neoclassical Growth Theory Is Based on the Assumption of Marginal