If a 10-percent increase in both capital and labour causes output to increase by less than 10

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If a 10-percent increase in both capital and labour causes output to increase by less than 10 percent, the production function is said to exhibit decreasing returns to scale. If it causes out-put to increase by more than 10 percent, the production function is said to exhibit increasing returns to scale. Why might a production function exhibit decreasing or increasing returns to scale?
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Macroeconomics

ISBN: 978-1464168505

5th Canadian Edition

Authors: N. Gregory Mankiw, William M. Scarth

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