Assuming a firm uses capital and labor to produce output, which of the following is not always a true statement?
A)Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to greater output.
B)Assuming the marginal products of labor and capital are less than zero, doubling the inputs of capital and labor will lead to less output.
C)Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to double the output.
D)Assuming the marginal products of labor and capital are greater than zero, doubling the input of capital and keeping the input of labor constant will lead to greater output.

Question

Quizplus · Accepted Answer

The statement "doubling the inputs of capital and labor will lead to double the output" is not always true since the production function may exhibit decreasing returns to scale or constant returns to scale. In those cases, doubling the inputs will not double the output. While it is true that increasing the inputs of both capital and labor will generally lead to increased output, the degree to which output increases depends on multiple factors, such as the level of technology being used and the efficiency of the production process. For example, doubling the inputs of capital and labor may not necessarily lead to double the output if the production process is already operating at near maximum efficiency. Therefore, statement C is not always true.

Assuming a Firm Uses Capital and Labor to Produce Output