Use the following two statements to answer this question: I. "Decreasing returns to scale" and "diminishing returns to a factor of production" are two phrases that mean the same thing.
II Diminishing returns to all factors of production implies decreasing returns to scale.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.

Question

Quizplus · Accepted Answer

"Decreasing returns to scale" refers to a situation where increasing all inputs leads to a less than proportional increase in output, while "diminishing returns to a factor of production" refers to a situation where increasing one input while keeping others constant leads to a decrease in the marginal output. These are different concepts. Additionally, diminishing returns to all factors do not necessarily imply decreasing returns to scale.

Use the Following Two Statements to Answer This Question: I