What does the term "decreasing returns to scale" mean?
A)The situation where a doubling of inputs results in output increasing by less than double.
B)The situation where a firm's output decreases in proportion to the decrease in its inputs.
C)It means that the firm is operating on the falling portion of its long run average cost curve.
D)It means that the firm is operating on the horizontal portion of its long run average cost curve.

Question

Quizplus · Accepted Answer

Decreasing returns to scale refers to the situation where a doubling of inputs results in output increasing by less than double. This can occur when a firm becomes too large and difficult to manage, leading to inefficiencies and diminishing returns.

What Does the Term "Decreasing Returns to Scale" Mean