Decreasing returns to scale
A)indicate that an increase in all inputs by some proportion will result in a decrease in output.
B)must always occur at some point in the production process.
C)are directly related to the law of diminishing returns.
D)All of the above are true.
E)None of the above is true.

Question

Quizplus · Accepted Answer

Decreasing returns to scale occur when an increase in all inputs by some proportion results in a less than proportional increase in output, not a decrease in output. It does not necessarily have to occur at some point in the production process, as some processes may exhibit constant or increasing returns to scale at all levels of production. While related to the concept of diminishing returns, which applies to variable inputs while holding other inputs fixed, decreasing returns to scale refers to the behavior of output in response to proportional increases in all inputs, making it a distinct concept.

Decreasing Returns to Scale