Returns to scale refers to
A)What happens to output when at least one input is fixed and one is varied
B)What happens to output when all inputs are held fixed
C)What happens to output when all inputs are varied in some proportion
D)The law of diminishing returns

Question

Quizplus · Accepted Answer

Returns to scale refer to the change in output when all inputs are varied in some proportion. This means that if all inputs are increased by a certain percentage, the resulting change in output will be proportionate to that increase. For example, if all inputs are increased by 10%, returns to scale would indicate that output would also increase by 10%. A is incorrect as it refers to the concept of short-run production with one fixed input. B is incorrect as it refers to the concept of long-run production with all inputs fixed. D is incorrect as it refers to the relationship between input and output in the short-run where the marginal productivity of each additional unit of input will eventually decrease.

Returns to Scale Refers to