A production function for which proportional changes in all inputs leads to a more-than-proportional change in output is said to exhibit
A)Diminishing returns
B)Decreasing returns to scale
C)Constant returns to scale
D)Increasing returns to scale

Question

Quizplus · Accepted Answer

When all inputs are increased proportionally and the output increases by more than a proportional amount, the production function exhibits increasing returns to scale. This means that the firm is experiencing economies of scale, where larger production leads to lower average costs.

A Production Function for Which Proportional Changes in All Inputs