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Increasing returns to scale occurs due to:
- a)Economies of scale
- b)Specialization
- c)Indivisibility of factors
- d)All of these
Correct answer is option 'A'. Can you explain this answer?
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Increasing returns to scale occurs due to:a)Economies of scaleb)Specia...
An increasing returns to scale occurs when the output increases by a larger proportion than the increase in inputs during the production process. For example, if input is increased by 3 times, but output increases by 3.75 times, then the firm or economy has experienced an increasing returns to scale.
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Increasing returns to scale occurs due to:a)Economies of scaleb)Specia...
Economies of scale refer to the cost advantages that a business can achieve with increasing production. When a business increases its scale of production, it can benefit from economies of scale, which can lead to increased efficiency and lower costs. This results in increasing returns to scale.
Factors contributing to increasing returns to scale include:
1. Economies of scale: As production increases, the cost per unit of output decreases. This is because the fixed costs of production, such as plant and equipment, can be spread over a larger number of units, reducing the cost per unit.
2. Specialization: As production increases, workers can specialize in specific tasks, leading to increased efficiency and productivity. This can result in lower costs and higher output.
3. Indivisibility of factors: Some factors of production, such as machinery and equipment, cannot be easily divided into smaller units. As production increases, these factors can be used more efficiently, resulting in lower costs per unit.
Overall, increasing returns to scale can lead to significant cost advantages for businesses, allowing them to produce more output at a lower cost. This can lead to increased profitability and competitiveness in the market.
Factors contributing to increasing returns to scale include:
1. Economies of scale: As production increases, the cost per unit of output decreases. This is because the fixed costs of production, such as plant and equipment, can be spread over a larger number of units, reducing the cost per unit.
2. Specialization: As production increases, workers can specialize in specific tasks, leading to increased efficiency and productivity. This can result in lower costs and higher output.
3. Indivisibility of factors: Some factors of production, such as machinery and equipment, cannot be easily divided into smaller units. As production increases, these factors can be used more efficiently, resulting in lower costs per unit.
Overall, increasing returns to scale can lead to significant cost advantages for businesses, allowing them to produce more output at a lower cost. This can lead to increased profitability and competitiveness in the market.
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Increasing returns to scale occurs due to:a)Economies of scaleb)Specializationc)Indivisibility of factorsd)All of theseCorrect answer is option 'A'. Can you explain this answer?
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