Suppose That an Economy with Constant Returns to Scale Doubled

question 120

Multiple Choice

Suppose that an economy with constant returns to scale doubled its physical capital stock, doubled its available natural resources, and doubled its human capital, but kept the size of the labour force the same. How does the change in output compare to the change in productivity?

• A) Output would stay the same and so would its productivity.
• B) Output and productivity would increase, but by less than double.
• C) Output and productivity would increase by more than double.
• D) Output would increase by less than double, but productivity would double.

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