An example of increasing returns to scale is when capital and labour inputs:
A)both increase 10 percent and output increases 5 percent.
B)both increase 10 percent and output increases 10 percent.
C)both increase 5 percent and output increases 10 percent.
D)do not change and output decreases 5 percent.

Question

Quizplus · Accepted Answer

Increasing returns to scale occur when the percentage increase in output is greater than the percentage increase in inputs. In option C, inputs increase by 5% and output increases by 10%, indicating increasing returns to scale.

An Example of Increasing Returns to Scale Is When Capital