Question

If increasing returns to scale are present, then if all inputs are increased by $10\%$ then ______________.

• A. output will increase by more than $10\%$
• B. output will increase by less than $10\%$
• C. output will increase by $10\%$
• D. output will also decrease by $10\%$.

Answer 1

The correct option is A output will increase by more than $10\%$

In case of increasing returns, the output increases more than the change in input. If inputs are increased by 10% then output will increase by more than 10%.