If all inputs are doubled and the resulting output increases by less than a factor of two, the technology features
A) increasing returns to scale
B) decreasing returns to scale
C) constant returns to scale

Question

Quizplus · Accepted Answer

This is because doubling all inputs should result in a doubling of output if the technology exhibits constant returns to scale. However, since the resulting output increases by less than a factor of two, this indicates that the technology features decreasing returns to scale.

If All Inputs Are Doubled and the Resulting Output Increases