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JAMB Economics 2007 Question 18

Question 18

Theory of Production

A characteristic of the linear production function is that

  1. A.the percentage change in inputs exceeds output
  2. B.output and all inputs change by the same percentage
  3. C.the percentage change in output is greater than one
  4. D.the percentage change in output is less than one
Show the answer and explanation

Answer: B (output and all inputs change by the same percentage)

Explanation

A linear (homogeneous) production function shows constant returns to scale: increasing all inputs by a given percentage raises output by the same percentage.