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Which of the following is the reason of the working of law of increasing returns?
- a)Fuller utilization of fixed factors
- b)Indivisibility of the factors
- c)Greater specialization of labour
- d)All of the above.
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
Which of the following is the reason of the working of law of increasi...
Reasons for the working of law of increasing returns:
- Fuller utilization of fixed factors: When the production of a good increases, the fixed factors of production, such as machinery and equipment, are used more efficiently. This leads to a higher output without a proportional increase in the cost of these fixed factors.
- Indivisibility of the factors: In some cases, certain factors of production cannot be divided into smaller units. In such cases, increasing the overall production can lead to a significant increase in output due to the indivisibility of these factors.
- Greater specialization of labour: As production increases, workers can specialize in specific tasks, leading to increased efficiency and productivity. This specialization results in a higher output per unit of input, contributing to the law of increasing returns.
- All of the above: The law of increasing returns is a combination of these factors working together to increase productivity and output as production levels rise. Fuller utilization of fixed factors, indivisibility of certain factors, and greater specialization of labor all contribute to the phenomenon of increasing returns.
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Which of the following is the reason of the working of law of increasi...
Understanding the Law of Increasing Returns
The law of increasing returns refers to a situation where an increase in the quantity of inputs leads to a more than proportionate increase in output. This phenomenon can be attributed to several factors, which collectively explain why this law operates effectively in production processes.
1. Fuller Utilization of Fixed Factors
- When production increases, fixed factors such as machinery and buildings are utilized more efficiently.
- This leads to a decrease in average costs as the same resources produce more output, enhancing productivity.
2. Indivisibility of the Factors
- Many factors of production, like machinery, are indivisible; they cannot be scaled down easily.
- As production scales up, these fixed inputs can serve a larger quantity of output, leading to increased efficiency and return.
3. Greater Specialization of Labour
- An increase in production allows for a division of labor, where workers can specialize in specific tasks.
- Specialization increases efficiency, reduces time, and enhances skill levels, contributing to higher output levels.
Conclusion
The law of increasing returns operates due to a combination of these factors: fuller utilization of fixed factors enhances efficiency, indivisibility allows for better scaling of inputs, and specialization boosts productivity. Therefore, the correct answer is indeed option 'D'—all of the above factors contribute to the working of the law of increasing returns. Understanding these elements is crucial for efficient production management in any business context.
The law of increasing returns refers to a situation where an increase in the quantity of inputs leads to a more than proportionate increase in output. This phenomenon can be attributed to several factors, which collectively explain why this law operates effectively in production processes.
1. Fuller Utilization of Fixed Factors
- When production increases, fixed factors such as machinery and buildings are utilized more efficiently.
- This leads to a decrease in average costs as the same resources produce more output, enhancing productivity.
2. Indivisibility of the Factors
- Many factors of production, like machinery, are indivisible; they cannot be scaled down easily.
- As production scales up, these fixed inputs can serve a larger quantity of output, leading to increased efficiency and return.
3. Greater Specialization of Labour
- An increase in production allows for a division of labor, where workers can specialize in specific tasks.
- Specialization increases efficiency, reduces time, and enhances skill levels, contributing to higher output levels.
Conclusion
The law of increasing returns operates due to a combination of these factors: fuller utilization of fixed factors enhances efficiency, indivisibility allows for better scaling of inputs, and specialization boosts productivity. Therefore, the correct answer is indeed option 'D'—all of the above factors contribute to the working of the law of increasing returns. Understanding these elements is crucial for efficient production management in any business context.
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Which of the following is the reason of the working of law of increasing returns?a)Fuller utilization of fixed factorsb)Indivisibility of the factorsc)Greater specialization of labourd)All of the above.Correct answer is option 'D'. Can you explain this answer?
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