Courses

# 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. Related Test: Test: Theory Of Production- 1

## CA Foundation Question

By Sajeev Kugathasan · Oct 11, 2018 ·CA Foundation
Proficient Muzaffar answered Jun 05, 2018

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)

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.