The Production Function Feature Called "Constant Returns to Scale" Means

question 30

Multiple Choice

The production function feature called "constant returns to scale" means that if we:

• A).multiply capital by z
• And labor by z , we multiply output by z .
• 1 2 3
• B)increase capital and labor by 10 percent each, we increase output by 10 percent.
• C)increase capital and labor by 5 percent each, we increase output by 10 percent.
• D)increase capital by 10 percent and increase labor by 5 percent, we increase output by 7.5 percent.

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Definitions:

Direct Cost

Expenses that can be directly traced to the production of a specific good or service, such as materials and labor.

Period Cost

Costs that are expensed in the period in which they are incurred; often administrative or selling expenses, not directly tied to production.

Product Cost

The total costs incurred to create a product, including direct materials, direct labor, and manufacturing overhead expenses.

Product Cost

The total cost associated with making or acquiring a product, including direct materials, direct labor, and manufacturing overhead.