If the sum of the exponents of a Cobb-Douglas production function is equal to 1.2, the production function exhibits:
A) increasing returns to scale.
B) constant returns to scale.
C) diminishing marginal returns.
D) declining productivity.
E) increasing average costs.

Question

Quizplus · Accepted Answer

When the sum of the exponents in a Cobb-Douglas production function exceeds 1, it exhibits increasing returns to scale, indicating that a proportional increase in all inputs leads to a more than proportional increase in output.

If the Sum of the Exponents of a Cobb-Douglas Production