Question
Please help to answer the following multiple choice question and explain. Thanks. Question: When does a production function exhibit decreasing returns to scales? a) Decreasing
Please help to answer the following multiple choice question and explain. Thanks.
Question:
When does a production function exhibit decreasing returns to scales?
a) Decreasing returns to scale may happen if there is a fixed factor such as land in the production function, and this fixed factor becomes scarce as the economy grows larger
B. A production function shows decreasing returns to scale if an equal percentage increase in factors of production leads to a smaller percentage increase in output.
C) A production function shows decreasing returns to scale if an equal percentage increase in factors of production leads to a smaller percentage increase in output. This is because factors of production become scare as the economy grows.
D) A production function may show decreasing returns to scale of the costs of inputs increase.
Regards,
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