If the production function exhibits increasing returns to scale in the steady state, an increase in the rate of growth of population would lead to:

Question

Quizplus · Accepted Answer

If the production function exhibits increasing returns to scale in the steady state, then an increase in the rate of population growth leads to an increase in the labor supply. This would cause an increase in total output due to increased inputs. Additionally, due to the production function exhibiting increasing returns to scale, the increase in inputs would lead to an even larger increase in output per worker, resulting in growth in output per worker as well.

If the Production Function Exhibits Increasing Returns to Scale in the Steady