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.

CA Foundation Question

6 Answers
Proficient Muzaffar answered Jun 05, 2018
Correct answer is decreasing return to scale

Parth Agarwal answered Jun 05, 2018
Ya bcoz the law states that if we increase inputs in any proportion then output will increse either more less. or in equal proportion. so there is no such law that says with increase in inputs o/p decreases

Saravana Ganesh answered Aug 06, 2019
By increasing inputs output cannot decrease so it is hypothetical so ans is(d)

Suraksha Pahwa answered Oct 11, 2018
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.

Nandipati Jagadesh answered Jun 07, 2019
The correct answer is negative returns.

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