In a production process you use 2 units of labor and 3 Units of Capital to produce 6 units of output. Once you increase the the inputs to 4 units of labor and 6 units of capital the total output is now 10 units. What type of returns to scale do you have in the production process? Decreasing returns to scale Increasing Returns to scale Increasing marginal returns to scale Constant Returns to scale
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5 units of output per unit of labor Output per unit of capital = 10 units / 6 units of capital = 1.67 units of output per unit of capital Comparing the output per unit of labor and capital in the initial and increased production processes, we can see that the Show more…
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