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In the Solow growth model, the assumption of constant returns to scale means that

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MH SET 2026 Paper 1 Question Paper (25-Oct-2026)
The correct answer is

Output per worker depends only on capital per worker, not on the number of workers

The Solow model uses an aggregate production function Y = F(K, L). Constant returns to scale means that multiplying both inputs by any factor z multiplies output by the same factor: F(zK, zL) = zF(K, L).

Setting z = 1/L gives \(\frac{Y}{L} = F\left(\frac{K}{L}, 1\right)\), i.e. y = f(k): output per worker depends only on capital per worker.

The number of workers L does not appear in this relationship, so a small and a large economy with the same capital per worker produce the same output per worker. This is what allows the whole Solow model to be analysed in per-worker terms.

Constant returns apply only when both inputs change in the same proportion. If the number of workers alone doubles while capital is unchanged, capital per worker falls and diminishing returns to labour set in, so total output rises by less than double.

The assumption also does not mean that all economies have the same capital per worker (the steady-state k* depends on the saving rate, population growth and depreciation, which differ across economies), nor that the saving rate equals the rate of depreciation (the steady state equates investment sf(k) with break-even investment (n + δ)k, not s with δ).

Hence, the answer is Output per worker depends only on capital per worker, not on the number of workers.

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