Constant Returns to Scale Implies That If N and K

question 42

Multiple Choice

Constant returns to scale implies that if N and K both increase by 3% that

• A)output (Y)will increase by 3%.
• B)Y / N will increase by 3%.
• C)Y / N will increase by less than 3%.
• D)the capital-labor ratio will increase by 3%.

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Definitions:

Ordering Costs

Expenses associated with placing orders for more inventory, including costs related to order processing, communication, and transportation.

Memory Chips

Electronic components used to store data temporarily or permanently in computers and other devices.

Safety Stock

Safety stock is an additional quantity of an item held in inventory to reduce the risk of stockouts and production halts, serving as a buffer against demand fluctuations or supply delays.

Maximum Inventory

The highest quantity of goods that a company aims to keep in stock, considering factors like storage space and cash flow constraints.