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Q. If as a result of 90 percent increase in all inputs, the output increase by 75 percent this is a case of
- a)Increasing return of a factor
- b)Decreasing return to a factor
- c)Diminishing return to scale
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
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Q. If as a result of 90 percent increase in all inputs, the output inc...
Explanation:
This question is related to the concept of production function in microeconomics. The production function shows the relationship between the inputs used in production and the output produced.
In this case, we are given that all inputs have increased by 90 percent, and the output has increased by 75 percent. This means that the production function has not exhibited increasing returns to scale, where an increase in all inputs leads to a more than proportional increase in output. Instead, the production function has exhibited diminishing returns to scale, where an increase in all inputs leads to a less than proportional increase in output.
Diminishing returns to scale occur when the increase in output is less than the increase in inputs. This can happen due to various reasons such as the limited capacity of the production process, the availability of resources, and the efficiency of the production process. In this case, the increase in inputs has not resulted in a proportionate increase in output, which suggests that the production process has become less efficient due to the increase in inputs.
Therefore, the correct answer is option C, which states that this is a case of diminishing returns to scale.
This question is related to the concept of production function in microeconomics. The production function shows the relationship between the inputs used in production and the output produced.
In this case, we are given that all inputs have increased by 90 percent, and the output has increased by 75 percent. This means that the production function has not exhibited increasing returns to scale, where an increase in all inputs leads to a more than proportional increase in output. Instead, the production function has exhibited diminishing returns to scale, where an increase in all inputs leads to a less than proportional increase in output.
Diminishing returns to scale occur when the increase in output is less than the increase in inputs. This can happen due to various reasons such as the limited capacity of the production process, the availability of resources, and the efficiency of the production process. In this case, the increase in inputs has not resulted in a proportionate increase in output, which suggests that the production process has become less efficient due to the increase in inputs.
Therefore, the correct answer is option C, which states that this is a case of diminishing returns to scale.
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Q. If as a result of 90 percent increase in all inputs, the output increase by 75 percent this is a case ofa)Increasing return of a factorb)Decreasing return to a factorc)Diminishing return to scaled)None of the aboveCorrect answer is option 'C'. Can you explain this answer?
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