Figure 6.12 Returns to Scale
(a) A production function has constant returns to scale if changing the amount of capital and labor by some multiple changes the output by exactly the same multiple. When the input combination (L, K) doubles from (1, 1) to (2, 2), output doubles from Q = 1 to Q = 2.
(b) A production function has increasing returns to scale if changing the amount of capital and labor by some multiple changes the output by more than that multiple. When the input combination (L, K) doubles from (1, 1) to (2, 2), output more than doubles from Q = 1 to Q = 2.5.
(c) A production function has decreasing returns to scale if changing the amount of capital and labor by some multiple changes the output by less than that multiple. When the input combination (L, K) doubles from (1, 1) to (2, 2), output less than doubles from Q = 1 to Q = 1.8.