Question

In this production function, what is the degree of returns to scale?

A) Constant returns to scale
B) Increasing returns to scale
C) Decreasing returns to scale
D) Perfectly competitive returns to scale

Answer 1

Constant returns to scale is the degree of returns to scale in the production function where the average cost of production does not change as output increases.

Step-by-step explanation:

Constant returns to scale is the degree of returns to scale in the production function. It refers to a situation where the average cost of production does not change as output increases. This means that if all inputs are increased by a certain percentage, output will increase by the same percentage without any change in average cost.