The Assumption of Constant Returns to Scale Suggests That If

Multiple Choice

The assumption of constant returns to scale suggests that if N and K both decrease by 7%:

A) Y will decrease by exactly 7%.
B) The capital- labour ratio (K/N) will decrease.
C) Y will decrease by less than 7%.
D) Y will decrease by more than 7%.
E) The capital- labour ratio (K/N) will increase.