If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output willa. double and productivity will rise. b. double but productivity will not change. c. more than double and productivity will rise. more then double but productivity will not change

Question

Mckinley Clark

Business

6 December, 21:12

If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output willa. double and productivity will rise. b. double but productivity will not change. c. more than double and productivity will rise. more then double but productivity will not change

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Answers (1)

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Wade Lopez · Answer 1

Letter b is correct. Double but productivity will not change.

Explanation:

Scale returns are characterized by an increase in production associated with an increase in production factors.

It is a concept that relates to the concept of economy of scale, but while in an economy of scale the effect of decreasing unit cost related to an increase in production levels, a return of scale corresponds to the effect of increase that occurs by the relation between the quantity of inputs and production.

Therefore, alternative b is correct, because at a constant return to scale, productivity increases at the same rate as inputs increase.