Are PostgreSQL functions that return sets or tables evaluated lazily or eagerly?

Cross post from Stack Overflow:
https://stackoverflow.com/questions/59554144/are-postgresql-functions-that-return-sets-or-tables-evaluated-lazily-or-eagerly

I'm learning to write functions in PostgreSQL. When I got to the
documentation chapter on cursors, I came across this interesting comment:

A more interesting usage is to return a reference to a cursor that a
function has created, allowing the caller to read the rows. This provides
an efficient way to return large row sets from functions.

Near the top of this page: 42.7. Cursors
<https://www.postgresql.org/docs/current/plpgsql-cursors.html>

That made me wonder where, specifically, this would be more efficient than
a plain old function call.

I made up a little test function and call:

CREATE FUNCTION foo() RETURNS SETOF customers
LANGUAGE SQL AS $$
SELECT c.* FROM customers c
CROSS JOIN customers x
CROSS JOIN customers y;$$;
SELECT * FROM foo() LIMIT 1;

The customers table I'm working with has 20,000 rows so with the cross
joins that should be 8e+12 rows (which would take a while to fully
evaluate!). The select statement at the end appears to confirm that the
function is reading all rows (I had to cancel it after several seconds --
way more than to just return the first row)

That leads me to ask:

If (and under what circumstances) PostgreSQL evaluates functions lazily
(returning rows as requested by the caller) or eagerly (evaluation all rows
before returning the first one)?

--
Gerald Britton, MCSE-DP, MVP
LinkedIn Profile: http://ca.linkedin.com/in/geraldbritton