Assume that constant returns to scale exists and that N and K both increase by 2%. Given this information, we know that
A. output (Y) will increase by 4%.
B. Y will increase by 2%.
C. Y will increase by less than 2%.
D. Y will increase by less than 4% and more than 2%.
Answer:B
Assume that constant returns to scale exists and that N and K both increase by 2%. Given this information, we know that
A. output (Y) will increase by 4%. B. Y will increase by 2%. C. Y will increase by less than 2%. D. Y will increase by less than 4% and more than 2%.