Which of the following statements describes increasing returns to scale:
A)doubling the inputs used leads to double the output.
B)increasing the inputs by 50% leads to a 25% increase in output.
C)increasing inputs by 1/4 leads to an increase in output of 1/3.
D)none of the above.

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, increasing inputs by 1/4 (or 25%) leads to an increase in output of 1/3 (or approximately 33%), which is an example of increasing returns to scale.

Which of the Following Statements Describes Increasing Returns to Scale