The Assumption of Constant Returns to Scale Suggests That If

question 21

Multiple Choice

The assumption of constant returns to scale suggests that if N and K both increase by 5%:

• A) Y will increase by exactly 5%.
• B) Y will increase by less than 5%.
• C) Y will increase by more than 5%.
• D) The capital- labour ratio (K/N) will decrease.
• E) The capital- labour ratio (K/N) will increase.

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Definitions:

Multiple Regression

A mathematical method for modeling the connection between a single dependent variable and multiple independent variables.

F Statistic

A measure used in statistical analysis to assess the significance of a group of variables in a regression model.

P-value

The likelihood of witnessing outcomes in a test that are as significant or more so, given the premise that the null hypothesis is true.

Promotional Expenditures

The financial resources spent on marketing and advertising campaigns to boost sales or raise awareness.