3. If a 10 percent increase in both capital and labor causes output to increase by less...

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3. If a 10 percent increase in both capital and labor causes output to increase by less than 10 percent, the production function is said to exhibit decreasing returns to scale. If it causes output 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: 9781319263904

11th Edition

Authors: N. Gregory Mankiw

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