In the long run, production function can display _________.

All of the above

The correct answer is Option 4: All of the above

In the long run, all factors of production are variable, and the production function can exhibit different types of returns to scale:

1. Constant Returns to Scale (CRS)

   • When all inputs are increased by a certain proportion, output increases by the same proportion.
   • Example: Doubling both labor and capital results in double the output.

2. Increasing Returns to Scale (IRS)

   • When all inputs are increased by a certain proportion, output increases by a greater proportion.
   • Occurs due to economies of scale, such as specialization, improved efficiency, and better technology.
   • Example: Doubling inputs leads to more than double the output.

3. Decreasing Returns to Scale (DRS)

   • When all inputs are increased by a certain proportion, output increases by a lesser proportion.
   • Occurs due to diseconomies of scale, such as coordination difficulties and inefficiencies in large-scale production.
   • Example: Doubling inputs leads to less than double the output.