If all the factors of production are increased by the same proportion, and as a result the output increases by a greater proportion, then it is called:

[1 mark]

Constant returns to scale

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Decreasing returns to scale

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Both A and B

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None of the above

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Solution

The correct option is D None of the above
If all the factors of production are increased in the same proportion, and as a result the output increases by a greater proportion, then it is called increasing returns to scale.

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Similar questions

Increasing returns to scale (IRS) holds when a proportional increase in all inputs results in an increase in output by more than the proportion.

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