Option 1 -> This is the definition of increasing returns to scale where output increases by more than the proportional increase in inputs.
Option 2 -> This represents decreasing returns to scale where output increases by less than the proportional increase in inputs.
Option 3 -> This represents constant returns to scale where output increases proportionally with inputs.
Option 4 -> This is a Cobb-Douglas function; its returns to scale depend on α+β (increasing if α+β>1, constant if α+β=1, decreasing if α+β<1).
Hence, Option 1: f(tx, ty) > t f(x, y) -> This is the mathematical definition of increasing returns to scale. When all inputs (x, y) are scaled by factor t > 1, the output f(tx, ty) increases by more than t times the original output f(x, y). This occurs in production processes with economies of scale, specialization, or network effects. For example, if doubling inputs (t=2) more than doubles output, the firm benefits from increasing returns to scale. -> correct