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

question 29

Multiple Choice

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

• A)multiply capital by z₁ and labour by z₂, we multiply output by z₃.
• B)increase capital and labour by 10 percent each, we increase output by 10 percent.
• C)increase capital and labour by 5 percent each, we increase output by 10 percent.
• D)increase capital by 10 percent and increase labour by 5 percent, we increase output by 7.5 percent.

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