Question

__________ holds when a proportional increase in all inputs results in an increase in output by more than the proportion

• A. Constant returns to scale
• B. Increasing returns to scale
• C. Decreasing returns to scale
• D. None

Answer 1

The correct option is B Increasing returns to scale

Increasing returns to scale: If increases in outputs are proportionately more than an increase in quantity of all inputs, returns to scale are said to be increasing. The terms in the Cobb-Douglas production function are raised to a coefficeint of values greater than 1.