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

A production function exhibiting increasing returns to scale implies that a given percentage increase in inputs will result in a more-than-proportional percentage increase in output. Therefore, D is the correct choice.

A Production Function for Which Proportional Changes in All Inputs