Assume that the aggregate production function exhibits constant returns to scale. Given this assumption, successive and equal increases in capital per worker will cause which of the following to occur?
A) Output per worker will increase by a constant amount.
B) Output per worker will not change.
C) Output per worker will increase by a larger amount.
D) Output per worker will decrease by a smaller amount.
E) Output per worker will increase by a smaller amount.

Question

Quizplus · Accepted Answer

With constant returns to scale, as capital per worker increases, output per worker increases but at a diminishing rate due to diminishing marginal returns to capital.

Assume That the Aggregate Production Function Exhibits Constant Returns to Scale