A production function that is characterized by economies of scale will not be subject to the operation of diminishing returns.

Question

Quizplus · Accepted Answer

Economies of scale and diminishing returns are different concepts. Economies of scale refer to cost advantages as production increases, while diminishing returns occur when adding more of one input leads to smaller increases in output, and they can coexist in different stages of production.

A Production Function That Is Characterized by Economies of Scale