If a firm doubles its inputs and output increases by two and half times then the production function exhibits _________.

decreasing returns to scale

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increasing returns to scale

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constant returns to scale

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decreasing cost industry

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Solution

The correct option is B increasing returns to scale
Since the input was only increased 2 times and the output increased 2.5 times, it output increased proportionately more than an increase in input. This is an example of increasing returns to scale.

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Similar questions

Q. Decreasing returns to scale is a property of a production function ______.

Constant returns to scale (CRS) is a property of production function that holds when a proportional increase in all inputs results in an increase in output by the same proportion.

When does a production function satisfy decreasing returns to scale?

Q. Increasing returns to scale is a property of a production function _____.

When does a production function satisfy increasing returns to scale?

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If a firm doubles its inputs and output increases by two and half times then the production function exhibits _________.

The correct option is B increasing returns to scaleSince the input was only increased 2 times and the output increased 2.5 times, it output increased proportionately more than an increase in input. This is an example of increasing returns to scale.

The correct option is B increasing returns to scale
Since the input was only increased 2 times and the output increased 2.5 times, it output increased proportionately more than an increase in input. This is an example of increasing returns to scale.