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

question 49

Multiple Choice

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

• A) multiply capital by z₁ and labor by z₂, we multiply output by z₃.
• 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:

Restrictive Trade

Practices that limit competition within a market, often through regulations or agreements that control and reduce the level of trade.

Favourable Treatment

Preferential treatment or advantage given to a person or group over others.

Protectionism

Economic policy measures implemented by a government to shield domestic industries from foreign competition, often through tariffs and quotas.

Cultural Miscues

Misunderstandings or errors in communication that occur due to differences in cultural norms and expectations.