In a particular production process the quantities of all inputs used double and then the quantity of output increases by less than double. This means that

a. no mathematical representation of the relevant production function can be formulated.

b. the relevant production function has the increasing returns property.

c. the relevant production function has the diminishing returns property.

d. relevant production function has the constant returns property.

Question

17-01-2020
Business

contestada

In a particular production process the quantities of all inputs used double and then the quantity of output increases by less than double. This means that

a. no mathematical representation of the relevant production function can be formulated.

b. the relevant production function has the increasing returns property.

c. the relevant production function has the diminishing returns property.

d. relevant production function has the constant returns property.

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ANSWER

C. DIMINISHING Returns to property/ scale

EXPLANATION

Returns to Scale is a production concept used in Long Run (when all factors are variable i.e changeable)

It denotes relative change in output when all inputs change in same proportion .

Increasing Returns to Scale : Proportionate Increase in Output > Proportionate Increase in all inputs .

Constant Returns to Scale : Proportionate Increase in Output = Proportionate Increase in all Inputs .

Negative Returns to Scale : Proportionate Increase in Output < Proportionate Increase in all Inputs .

So : If all inputs are doubled (X2) - If output increases equal i.e double (X2) , Constant Returns to Scale . If output increases more i.e triple (X3) , Increasing Returns to scale . If output increases less i.e (1.5X) , Decreasing Returns to Scale.