Suppose that capital and labor must be kept in a fixed proportion to produce a particular good. For example, digging a trench requires one worker who has one shovel. What does this imply about returns to scale?

Suppose that capital and labor must be kept in a fixed proportion to produce a particular good. For example, digging a trench requires one worker who has one shovel. What does this imply about returns to scale?



A) There are constant returns to scale.
B) There are increasing returns to scale.
C) There are decreasing returns to scale.
D) Nothing.



Answer: There are constant returns to scale.


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