If the sum of the powers associated with the inputs in a Cobb-Douglas production function exceeds 1,the production function is characterized by:
A)constant returns to scale.
B)decreasing returns to scale.
C)increasing returns to scale.
D)diminishing returns to all inputs.

Question

Quizplus · Accepted Answer

If the sum of the powers associated with the inputs in a Cobb-Douglas production function exceeds 1, the production function is characterized by increasing returns to scale. This means that if all inputs are increased by a certain percentage, the output will increase by more than that percentage, leading to economies of scale.

If the Sum of the Powers Associated with the Inputs