In given production function $q = f (x_1, x_2)$ what is depicted by $f(tx_1, tx_2) < t.f (x_1, x_2)$.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Decreasing returns to scale
$f(tx_1, tx_2) = t.f (x_1, x_2)$ = Constant Returns to Scale
$f(tx_1, tx_2) < t.f (x_1, x_2)$ = Decreasing Returns to Scale
$f(tx_1, tx_2) > t.f (x_1, x_2)$ = Increasing Returns to Scale