In the long run,a firm is said to be experiencing decreasing returns to scale if a 10 percent increase in inputs results in
A)an increase in output from 100 to 110.
B)a decrease in output from 100 to 90.
C)an increase in output from 100 to 105.
D)a decrease in output from 100 to 85.

Question

Quizplus · Accepted Answer

Decreasing returns to scale occur when an increase in inputs results in a proportionally smaller increase in output. In this case, a 10% increase in inputs leading to only a 5% increase in output (from 100 to 105) exemplifies decreasing returns to scale.

In the Long Run,a Firm Is Said to Be Experiencing