Question

If all inputs are increased in the same proportion, then it is a case of ___________.
(i) Short run production function
(ii) Long run production function
(iii) Laws of variable proportions
(iv) Laws of returns to scale

• A. (i) and (ii) only
• B. (ii) and (iii) only
• C. (i) and (iv) only
• D. (ii) and (iv) only

Answer 1

The correct option is D (ii) and (iv) only

All factors are only allowed to be varied in the long run, thus the firm can only adjust its scale of production (change its production function) in the long run. The law of returns to scale operates only when all the factors are variable, i.e., in the long run.