Question

A firm double all the factors of production resulting into 2 fold increase in production, this phenomena explains which principle of economics __________

• A. Constant Returns to scale.
• B. Increasing returns to scale
• C. Law of variable proportion
• D. Diminishing marginal utility

Answer 1

The correct option is A Constant Returns to scale.

If the proportional increase in all inputs is equal to the proportional increase in output (production), returns to scale are constant. For instance, if a simultaneous doubling of all inputs results in a doubling of production, then returns to scale are constant. Therefore a phenomena to double all factors of production to increase is called principle of constant return