If inputs are increased by 10 percent and output increases by 10 percent,then __________ are said to exist.

Question

Quizplus · Accepted Answer

When inputs and outputs increase proportionately with no change in technology or efficiency, it is known as constant returns to scale. This is because there is no change in the scale of production and the cost per unit remains the same. Economies of scale would occur if output increased by more than 10% when inputs increase by 10%, while diseconomies of scale would occur if output increased by less than 10%. Diminishing marginal returns, on the other hand, occur when adding one additional unit of input leads to a smaller increase in output.

If Inputs Are Increased by 10 Percent and Output Increases