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Can you explain the answer of this question below:
When output decreases by 20% due to increase in inputs by 20%, this stage called the law of _______
- A:Increasing returns to scale
- B:Decreasing returns to scale
- C:Constant returns to scale
- D:None of the above
The answer is d.
Verified Answer
Can you explain the answer of this question below:When output decrease...
Decreasing Returns to Scale
This occurs when an increase in all inputs (labour/capital) leads to a less than proportional increase in output.
For example, if a car firm increases its variable inputs (capital, raw materials and labour) by 50%, but the output of cars, increases by only 35%, then we say there are decreasing returns to scale from increasing the quantity of inputs.
This question is part of UPSC exam. View all CA Foundation courses
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Can you explain the answer of this question below:When output decrease...
Explanation:
The law of returns to scale describes the relationship between the increase in inputs used in production and the resulting increase in output. The three stages of returns to scale are:
1. Increasing returns to scale: when input increases by a certain percentage, output increases by a greater percentage.
2. Constant returns to scale: when input increases by a certain percentage, output increases by the same percentage.
3. Decreasing returns to scale: when input increases by a certain percentage, output increases by a smaller percentage.
In this question, the output has decreased by 20% due to an increase in inputs by 20%. This means that the resulting output is less than the input increase, indicating a decrease in returns to scale. However, since the decrease in output is not proportional to the increase in input, it cannot be considered a clear case of decreasing returns to scale. Therefore, the correct answer is D, none of the above.
The law of returns to scale describes the relationship between the increase in inputs used in production and the resulting increase in output. The three stages of returns to scale are:
1. Increasing returns to scale: when input increases by a certain percentage, output increases by a greater percentage.
2. Constant returns to scale: when input increases by a certain percentage, output increases by the same percentage.
3. Decreasing returns to scale: when input increases by a certain percentage, output increases by a smaller percentage.
In this question, the output has decreased by 20% due to an increase in inputs by 20%. This means that the resulting output is less than the input increase, indicating a decrease in returns to scale. However, since the decrease in output is not proportional to the increase in input, it cannot be considered a clear case of decreasing returns to scale. Therefore, the correct answer is D, none of the above.
Community Answer
Can you explain the answer of this question below:When output decrease...
It is D bcoz increasing input cannot coz uh decrease in ur output and if this happens then it's a case of negative return. This will not be decreasing return coz in decreasing return output increases but less than the increase in input. So in decreasing return also ur output increases but at decreasing rate.
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Can you explain the answer of this question below:When output decreases by 20% due to increase in inputs by 20%, this stage called the law of _______A:Increasing returns to scaleB:Decreasing returns to scaleC:Constant returns to scaleD:None of the aboveThe answer is d.
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