Suppose that capital and labor must be kept in a fixed proportion to produce a particular good.For example,digging a trench requires one worker who has one shovel.What does this imply about returns to scale?
A)There are constant returns to scale.
B)There are increasing returns to scale.
C)There are decreasing returns to scale.
D)Nothing.

Question

Quizplus · Accepted Answer

If the combination of capital and labor must be kept in a fixed proportion to produce a good, then the production function exhibits constant returns to scale. This means that if inputs are increased by a certain percentage, output will also increase by the same percentage. There will be no change in the efficiency of production with an increase in the scale of production.

Suppose That Capital and Labor Must Be Kept in a Fixed