If all inputs are raised by equal percentages and output increases by a larger percentage, there are decreasing returns to scale.

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Quizplus · Accepted Answer

When all inputs are raised by equal percentages, there is constant returns to scale, which means that the increase in output will be proportional to the increase in inputs. If output increases by a larger percentage, it implies increasing returns to scale. Decreasing returns to scale occur when the increase in inputs leads to a proportionally smaller increase in output.

If All Inputs Are Raised by Equal Percentages and Output