Consider the following statements when answering this question: I. If a technology exhibits diminishing returns then it also exhibits decreasing return to scale.
II) If a technology exhibits decreasing returns to scale then it also exhibits diminishing returns.
A) I is true, and II is false.
B) I is false, and II is true.
C) Both I and II are true.
D) Both I and II are false.

Question

Quizplus · Accepted Answer

Diminishing returns and decreasing returns to scale are related but distinct concepts. Diminishing returns refer to the short-run phenomenon where adding more of one input (while keeping other inputs constant) leads to a decrease in the marginal output. Decreasing returns to scale, however, refer to the long-run scenario where increasing all inputs proportionally results in a less than proportional increase in output. Thus, one does not necessarily imply the other.

Consider the Following Statements When Answering This Question: I