Returns to scale pertains to the impact on output of changing a single input while holding all other inputs constant; diminishing marginal returns pertains to the impact on output of increasing all inputs simultaneously.

Question

Quizplus · Accepted Answer

The statement is reversed. Returns to scale pertains to the impact on output of increasing all inputs simultaneously, while diminishing marginal returns pertains to the impact on output of changing a single input while holding all other inputs constant. The statement is incorrect. Returns to scale pertains to the impact on output of changing all inputs in the same proportion, while holding technology constant. Diminishing marginal returns pertains to the impact on output of increasing one input while holding all others constant.

Returns to Scale Pertains to the Impact on Output of Changing