In the long run,decreasing returns to scale are likely to be caused by
A)diseconomies of scale associated with management problems.
B)a decrease in factor prices.
C)increasing specialization of labour.
D)diminishing returns to the variable factor.
E)decreasing costs.

Question

Quizplus · Accepted Answer

Decreasing returns to scale occurs when the output increases by a smaller proportion than the increase in all inputs. One of the reasons for this is diseconomies of scale associated with management problems, where coordination and communication issues arise as a firm grows larger, making it difficult for managers to effectively manage the production process. This can lead to higher costs and lower productivity, resulting in decreasing returns to scale.

In the Long Run,decreasing Returns to Scale Are Likely to Be