Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Production and Costs

Question:

In given production function $q = f (x_1, x_2)$ what is depicted by $f(tx_1, tx_2) < t.f (x_1, x_2)$.

Options:

Constant returns to scale.

Increasing returns to scale

Decreasing returns to scale

Marginal returns to scale.

Correct Answer:

Decreasing returns to scale

Explanation:

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