Economics · Production and Costs
Consider a production function q = f(x1, x2) where a firm produces output q using factor 1 (x1) and factor 2 (x2). If the firm increases both inputs by a factor t (t > 1), which inequality represents decreasing returns to scale (DRS)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1f(t x1, t x2) > t × f(x1, x2)
- 2f(t x1, t x2) < t × f(x1, x2)✓
- 3f(t x1, t x2) = f(x1, x2)
- 4f(t x1, t x2) = t × f(x1, x2)
Correct answer
f(t x1, t x2) < t × f(x1, x2)
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