Question

Decreasing returns to scale, Constant returns to scale, Increasing returns to scale are properties of the _________.

• A. demand function
• B. supply function
• C. production function
• D. profit function

Answer 1

Answer: (C)

production function

The value that the terms in the Cobb-Douglas production function are raised to will determine if the function is exhibiting decreasing returns to scale, constant returns to scale or increasing returns to scale. If the coefficient is between 0 and 1, the function exhibits decreasing returns to scale. If the coefficient is 1, the function exhibits constant returns to scale. If the coefficient is larger than 1, the function exhibits increasing returns to scale.