If a production function exhibits constant returns to scale ?
Correct answer: D. doubling all of the input's doubles output
- A. doubling all of the inputs more than doubles output due to the catch-up effect
- B. doubling all of the inputs has absolutely no impact on output because output is constant
- C. doubling all of the inputs less than doubles output due to diminishing returns
- D. doubling all of the input's doubles output
Explanation
Constant returns to scale means output changes in the same proportion as all inputs. Therefore, doubling every input doubles output, unlike increasing or decreasing returns to scale.
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