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Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:
- a)Output will increase by less than 10%
- b)Output will increase by 10%
- c)Output will decrease by 10%
- d)Output will increase by more than 10%
Correct answer is option 'A'. Can you explain this answer?
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Q. If decreasing returns to scale are present, then if all inputs are ...
Decreasing Returns to Scale
Decreasing returns to scale occurs when increasing all inputs by a certain percentage leads to a proportionally smaller increase in output. In other words, the rate of output growth is declining as the inputs are increased. This can happen due to various factors such as inefficiencies in the production process or limited availability of certain resources.
Effect of Increasing Inputs by 10%
When all inputs are increased by 10%, the effect on output depends on the presence of decreasing returns to scale. Let's consider the options given:
a) Output will increase by less than 10%
This option suggests that the increase in output will be smaller than the increase in inputs. It aligns with the concept of decreasing returns to scale, where the output growth rate is lower than the input growth rate.
b) Output will increase by 10%
This option suggests that the increase in output will be exactly the same as the increase in inputs. However, this contradicts the concept of decreasing returns to scale, as it implies constant returns to scale.
c) Output will decrease by 10%
This option suggests that the increase in inputs will actually lead to a decrease in output. However, this contradicts the assumption that increasing inputs would result in some level of output growth.
d) Output will increase by more than 10%
This option suggests that the increase in output will be greater than the increase in inputs. However, this contradicts the concept of decreasing returns to scale, as it implies increasing returns to scale.
Conclusion
Based on the given options and the concept of decreasing returns to scale, the correct answer is option 'a'. When all inputs are increased by 10%, the output will increase by less than 10% due to diminishing returns. This means that the rate of output growth will be lower than the rate of input growth.
Decreasing returns to scale occurs when increasing all inputs by a certain percentage leads to a proportionally smaller increase in output. In other words, the rate of output growth is declining as the inputs are increased. This can happen due to various factors such as inefficiencies in the production process or limited availability of certain resources.
Effect of Increasing Inputs by 10%
When all inputs are increased by 10%, the effect on output depends on the presence of decreasing returns to scale. Let's consider the options given:
a) Output will increase by less than 10%
This option suggests that the increase in output will be smaller than the increase in inputs. It aligns with the concept of decreasing returns to scale, where the output growth rate is lower than the input growth rate.
b) Output will increase by 10%
This option suggests that the increase in output will be exactly the same as the increase in inputs. However, this contradicts the concept of decreasing returns to scale, as it implies constant returns to scale.
c) Output will decrease by 10%
This option suggests that the increase in inputs will actually lead to a decrease in output. However, this contradicts the assumption that increasing inputs would result in some level of output growth.
d) Output will increase by more than 10%
This option suggests that the increase in output will be greater than the increase in inputs. However, this contradicts the concept of decreasing returns to scale, as it implies increasing returns to scale.
Conclusion
Based on the given options and the concept of decreasing returns to scale, the correct answer is option 'a'. When all inputs are increased by 10%, the output will increase by less than 10% due to diminishing returns. This means that the rate of output growth will be lower than the rate of input growth.
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Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer?
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Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer?.
Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer?.
Solutions for Q. If decreasing returns to scale are present, then if all inputs are increased by 10% then:a)Output will increase by less than 10%b)Output will increase by 10%c)Output will decrease by 10%d)Output will increase by more than 10%Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
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