Decreasing returns to scale and diminishing marginal returns are just two different ways of saying the same thing.

Question

Quizplus · Accepted Answer

Decreasing returns to scale refer to a change in input proportions resulting in a less than proportional change in output, while diminishing marginal returns refer to the decrease in additional output generated by adding one more unit of input while holding other inputs constant. Therefore, they are not the same thing. Decreasing returns to scale refers to the situation where increasing all inputs by a certain proportion leads to less than proportional increase in output. Diminishing marginal returns, on the other hand, refers to the situation where increasing one input while holding all others constant leads to less than proportional increase in output. While both refer to a situation where adding more inputs leads to smaller increases in output, they are not the same thing.

Decreasing Returns to Scale and Diminishing Marginal Returns Are Just