A firm has increasing returns to scale if
A) A proportional change in the use of all inputs produces a more than proportional change in output
B) A proportional change in the use of all inputs produces a less than proportional change in output
C) A proportional change in the use of all inputs produces the same proportional change in output
D) An increase in capital leads to an increase in output

Question

Quizplus · Accepted Answer

Increasing returns to scale means that as all inputs are increased proportionally, output increases by a more than proportional amount. Therefore, choice A is correct.

A Firm Has Increasing Returns to Scale If