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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
Nidhi taparia Best Answer
The correct answer is c. Returns to scale means how much does the output change when both inputs are changed in the same proportion. For example, if inputs are doubled and output, - 1. also doubles, constant returns to scale accrue. 2. increases but less than double, decreasing returns to scale accrue. 3. increases even more than double, increasing returns to scale accrue. In the above case, as inputs are increased t times, increasing returns to scale will accrue when output or f(x1, x2) increases more than t times. Mathematically, f(tx1, tx2) > t.f(x1, x2).