If a firm doubles all inputs in the long run and the total output is...
ECONOMICS
JAMB 2012
If a firm doubles all inputs in the long run and the total output is less than doubled, this results in
- A. diminishing returns
- B. constant returns to scale
- C. increasing returns to scale
- D. decreasing returns to scale
Correct Answer: D. decreasing returns to scale
Explanation
A decreasing returns to scale occurs when the proportion of output is less than the desired increased input during the production process. For example, if input is increased by 3 times, but output is reduced 2 times, the firm or economy has experienced decreasing returns to scale.
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