CUET Economics - In a production function q = f(x_1, x_2) where the firm produces q output using x_1 of factor 1 and x_2 of factor 2. Now suppose the firm decides to increase the employment level of both the factors t (t > 1) times. then which among the following is correct? | PYQs + Solutions

CUET Economics 2025 29 May Shift 2

Micro

Medium

$f(tx_1, tx_2) > t f(x_1, x_2)$ i.e. constant returns to scale.

$f(tx_1, tx_2) < t f(x_1, x_2)$ i.e increasing returns to scale.

$f(tx_1, tx_2) < t f(x_1, x_2)$ i.e decreasing returns to scale.

$f(tx_1, tx_2) = t f(x_1, x_2)$ i.e decreasing returns to scale.

✅ Correct Option: 3

CUET Economics 2025 29 May Shift 2 PYQs