A Production Function Exhibits Constant Returns to Scale When You

question 104

Multiple Choice

A production function exhibits constant returns to scale when you:

• A) hold inputs constant-you double the output.
• B) double each input-you more than double the output.
• C) double each input-you less than double the output.
• D) double one input-you double the output.
• E) double each input-you double the output.

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Definitions:

Equilibrium Quantity

The level of goods or services on offer and in demand at the market's equilibrium price.

Demand Equation

A mathematical representation of the relationship between the quantity demanded of a good and its price, along with other factors like income and prices of related goods.

Supply Equation

An algebraic equation that represents the relationship between the quantity supplied of a good and its price, holding other factors constant.

Price Floor

A government or regulatory imposed minimum price above which a particular good or service cannot be traded.