Suppose the inputs of labour and capital each increase by 10% and output also increases by 10%. The production function exhibits __________ returns to scale.

Question

Quizplus · Accepted Answer

When both inputs (labour and capital) increase by 10% and output also increases by 10%, it indicates that the production function exhibits constant returns to scale. This means that the increase in inputs leads to a proportional increase in output.

Suppose the Inputs of Labour and Capital Each Increase by 10