Question

When are “Constant Returns to Scale” said to occur?

Options

• Output increases less than proportionally with inputs

• Output increases exactly in the same proportion as all inputs

• Only one input is changed and output increases

• Output decreases as inputs increase

Answer 1

Output increases exactly in the same proportion as all inputs

Explanation:

Constant Returns to Scale means when inputs are doubled, output doubles as well; there is a direct, equal relationship between input and output change.