In which of the following conditions, output increases with the same proportion of input?

Option 1 -> Output increases by a greater proportion than the increase in inputs.

Option 2 -> Output increases by a smaller proportion than the increase in inputs.

Option 3 -> Output increases by the same proportion as the increase in inputs.

Option 4 -> Refers to declining additional output from one variable input, not proportional changes in all inputs.

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Hence, Constant return to scale -> This occurs when all inputs are increased by a certain percentage and output increases by exactly the same percentage. For example, if labor and capital both double (100% increase), output also doubles (100% increase). This represents a proportional relationship where the production function is homogeneous of degree one. It indicates that the firm can scale up or down its operations without affecting efficiency. -> correct