Constant returns to scale means that,given any constant x 0, A) xY = zF(xK, xNd). B) xY zF(xK, xNd). C) xY

Question

Constant returns to scale means that,given any constant x > 0,
A) xY = zF(xK, xNd).
B) xY > zF(xK, xNd).
C) xY < zF(xK, xNd).
D) xY = ZxF(K, Nd).
E) xY = xzF(xF, xNd).

Quizplus · Accepted Answer

Constant returns to scale imply that if we increase all inputs by the same proportion x, then output will also increase by the same proportion x. Mathematically, it can be written as xY = zF(xK, xNd), which is option A. Option B and C are incorrect as they show output increasing or decreasing disproportionately to the increase in inputs, respectively. Option D is incorrect because it does not account for the increase in input proportion. Option E refers to a different type of production function and is therefore incorrect.

Constant Returns to Scale Means That,given Any Constant X >