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With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?
- a)Increasing returns to scale
- b)Decreasing returns to scale
- c)Constant returns to scale
- d)None of the above.
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
With a view to increase his production, Hariharan a manufacturer of sh...
Law of Decreasing Returns to Scale Where the proportionate increase in the inputs does not lead to equivalent increase in output, the output increases at a decreasing rate, the law of decreasing returns to scale is said to operate. This results in higher average cost per unit.
If the output (production) increases than the proportionality with input increases, we have decreasing returns to scale
DEFINITION
In the word of Boulding, "As we increase the quantity for any one input which is combined with fixed quantity of other inputs, the marginal physical productivity of the variable input must eventually decline."
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Most Upvoted Answer
With a view to increase his production, Hariharan a manufacturer of sh...
Decreasing returns to scale ... bcoz at the end he only got 80% of profit while he engaged his 100% of factor inputs
Community Answer
With a view to increase his production, Hariharan a manufacturer of sh...
Explanation:
Given that Hariharan increased all factors of production in his unit by 100%, we can say that he doubled the inputs used in the production process. However, at the end of the year, he found that his production increased only by 80%. This indicates that there is a diminishing rate of return to scale.
Law of Diminishing Returns:
The law of diminishing returns states that as the quantity of one factor of production is increased while keeping other factors constant, the marginal product of that factor will eventually decrease.
Factors of Production:
Factors of production refer to the inputs or resources used in the production process. These factors include land, labor, capital, and entrepreneurship.
Increasing Returns to Scale:
Increasing returns to scale occur when increasing all factors of production by a certain percentage leads to a more than proportionate increase in output. In other words, if doubling the inputs leads to more than a doubling of output, it is referred to as increasing returns to scale.
Decreasing Returns to Scale:
Decreasing returns to scale occur when increasing all factors of production by a certain percentage leads to a less than proportionate increase in output. In other words, if doubling the inputs leads to less than a doubling of output, it is referred to as decreasing returns to scale.
Constant Returns to Scale:
Constant returns to scale occur when increasing all factors of production by a certain percentage leads to an exactly proportionate increase in output. In other words, if doubling the inputs leads to exactly a doubling of output, it is referred to as constant returns to scale.
Analysis:
In this case, Hariharan increased all factors of production by 100% (doubling the inputs), but his production increased only by 80%. This implies that the increase in output is less than the increase in inputs, indicating a diminishing rate of return to scale. Therefore, the correct answer is option 'B' - Decreasing returns to scale.
Conclusion:
Hariharan's situation demonstrates the law of diminishing returns, where doubling the inputs results in a less than doubling of output. This indicates that his production process is experiencing decreasing returns to scale.
Given that Hariharan increased all factors of production in his unit by 100%, we can say that he doubled the inputs used in the production process. However, at the end of the year, he found that his production increased only by 80%. This indicates that there is a diminishing rate of return to scale.
Law of Diminishing Returns:
The law of diminishing returns states that as the quantity of one factor of production is increased while keeping other factors constant, the marginal product of that factor will eventually decrease.
Factors of Production:
Factors of production refer to the inputs or resources used in the production process. These factors include land, labor, capital, and entrepreneurship.
Increasing Returns to Scale:
Increasing returns to scale occur when increasing all factors of production by a certain percentage leads to a more than proportionate increase in output. In other words, if doubling the inputs leads to more than a doubling of output, it is referred to as increasing returns to scale.
Decreasing Returns to Scale:
Decreasing returns to scale occur when increasing all factors of production by a certain percentage leads to a less than proportionate increase in output. In other words, if doubling the inputs leads to less than a doubling of output, it is referred to as decreasing returns to scale.
Constant Returns to Scale:
Constant returns to scale occur when increasing all factors of production by a certain percentage leads to an exactly proportionate increase in output. In other words, if doubling the inputs leads to exactly a doubling of output, it is referred to as constant returns to scale.
Analysis:
In this case, Hariharan increased all factors of production by 100% (doubling the inputs), but his production increased only by 80%. This implies that the increase in output is less than the increase in inputs, indicating a diminishing rate of return to scale. Therefore, the correct answer is option 'B' - Decreasing returns to scale.
Conclusion:
Hariharan's situation demonstrates the law of diminishing returns, where doubling the inputs results in a less than doubling of output. This indicates that his production process is experiencing decreasing returns to scale.
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With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?a)Increasing returns to scaleb)Decreasing returns to scalec)Constant returns to scaled)None of the above.Correct answer is option 'B'. Can you explain this answer?
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With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?a)Increasing returns to scaleb)Decreasing returns to scalec)Constant returns to scaled)None of the above.Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?a)Increasing returns to scaleb)Decreasing returns to scalec)Constant returns to scaled)None of the above.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?a)Increasing returns to scaleb)Decreasing returns to scalec)Constant returns to scaled)None of the above.Correct answer is option 'B'. Can you explain this answer?.
With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?a)Increasing returns to scaleb)Decreasing returns to scalec)Constant returns to scaled)None of the above.Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?a)Increasing returns to scaleb)Decreasing returns to scalec)Constant returns to scaled)None of the above.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With a view to increase his production, Hariharan a manufacturer of shoes, increases all the factors of production in his unit by 100%. But at the end of the year he finds that instead of an increase of 100%, his production has increased by only 80%. Which law of returns to scale is operating in this case?a)Increasing returns to scaleb)Decreasing returns to scalec)Constant returns to scaled)None of the above.Correct answer is option 'B'. Can you explain this answer?.
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