If an increase in labour and capital of 10 per cent leads to output increasing by 20 per cent then, ceteris paribus, the economy is operating with:

Question

Quizplus · Accepted Answer

Increasing returns to scale occur when an increase in inputs leads to a more than proportionate increase in output. In this case, a 10% increase in labour and capital resulted in a 20% increase in output, indicating increasing returns to scale.

If an Increase in Labour and Capital of 10 Per