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If one unit of labour and one unit of capital give 200 units of output, two units of labour and two units of capital give 400 units of output and 5 units of labour and five units of capital give 1000 units of output, then this is a case of
- a)constant returns to scale
- b)increasing returns to scale
- c)decreasing returns to scale
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
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If one unit of labour and one unit of capital give 200 units of output...
Constant Returns to Scale
Constant returns to scale refer to a production function where an increase in inputs results in an equal increase in output. In this case, the given production function exhibits constant returns to scale because the increase in inputs (labour and capital) results in a proportional increase in output.
Explanation:
Given,
One unit of labour and one unit of capital give 200 units of output.
Two units of labour and two units of capital give 400 units of output.
Five units of labour and five units of capital give 1000 units of output.
Now, let's calculate the output per unit of labour and capital.
For one unit of labour and one unit of capital, output = 200 units.
Output per unit of labour = 200/1 = 200 units.
Output per unit of capital = 200/1 = 200 units.
For two units of labour and two units of capital, output = 400 units.
Output per unit of labour = 400/2 = 200 units.
Output per unit of capital = 400/2 = 200 units.
For five units of labour and five units of capital, output = 1000 units.
Output per unit of labour = 1000/5 = 200 units.
Output per unit of capital = 1000/5 = 200 units.
As we can see, the output per unit of labour and capital remains constant at 200 units. Hence, the production function exhibits constant returns to scale.
Conclusion:
Therefore, we can conclude that the given production function exhibits constant returns to scale, as an increase in inputs results in an equal increase in output.
Constant returns to scale refer to a production function where an increase in inputs results in an equal increase in output. In this case, the given production function exhibits constant returns to scale because the increase in inputs (labour and capital) results in a proportional increase in output.
Explanation:
Given,
One unit of labour and one unit of capital give 200 units of output.
Two units of labour and two units of capital give 400 units of output.
Five units of labour and five units of capital give 1000 units of output.
Now, let's calculate the output per unit of labour and capital.
For one unit of labour and one unit of capital, output = 200 units.
Output per unit of labour = 200/1 = 200 units.
Output per unit of capital = 200/1 = 200 units.
For two units of labour and two units of capital, output = 400 units.
Output per unit of labour = 400/2 = 200 units.
Output per unit of capital = 400/2 = 200 units.
For five units of labour and five units of capital, output = 1000 units.
Output per unit of labour = 1000/5 = 200 units.
Output per unit of capital = 1000/5 = 200 units.
As we can see, the output per unit of labour and capital remains constant at 200 units. Hence, the production function exhibits constant returns to scale.
Conclusion:
Therefore, we can conclude that the given production function exhibits constant returns to scale, as an increase in inputs results in an equal increase in output.
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If one unit of labour and one unit of capital give 200 units of output, two units of labour and two units of capital give 400 units of output and 5 units of labour and five units of capital give 1000 units of output, then this is a case ofa)constant returns to scaleb)increasing returns to scalec)decreasing returns to scaled)None of the aboveCorrect answer is option 'A'. Can you explain this answer?
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If one unit of labour and one unit of capital give 200 units of output, two units of labour and two units of capital give 400 units of output and 5 units of labour and five units of capital give 1000 units of output, then this is a case ofa)constant returns to scaleb)increasing returns to scalec)decreasing returns to scaled)None of the aboveCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If one unit of labour and one unit of capital give 200 units of output, two units of labour and two units of capital give 400 units of output and 5 units of labour and five units of capital give 1000 units of output, then this is a case ofa)constant returns to scaleb)increasing returns to scalec)decreasing returns to scaled)None of the aboveCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If one unit of labour and one unit of capital give 200 units of output, two units of labour and two units of capital give 400 units of output and 5 units of labour and five units of capital give 1000 units of output, then this is a case ofa)constant returns to scaleb)increasing returns to scalec)decreasing returns to scaled)None of the aboveCorrect answer is option 'A'. Can you explain this answer?.
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