Explain briefly the following concepts:
(a) Increasing returns to scale
(b) Decreasing returns to scale
(c) Constant returns to scale
Increasing returns to scale: An increased in input usage results in a greater percentage change in output.
Decreasing returns to scale: An increased in input usage results in a smaller percentage change in output.
Constant returns to scale: An increased in input usage results in an equal percentage change in output.
You might also like to view...
In the long run, a firm in monopolistic competition will
A) make a negative economic profit, that is, an economic loss. B) make zero economic profit, that is, a normal profit. C) make a positive economic profit. D) None of the above answers is necessarily correct because the amount of the profit or loss depends on the slope of the demand curve.
The cross-price elasticity of demand for coffee and tea is likely to be
A) greater than zero. B) less than zero. C) zero. D) infinity.
According to classical theory,
A. any deficiency in total demand from declining investment leads to long-term unemployment. B. flexible interest rates assure the equality of aggregate saving and investment. C. low interest rates discourage economic investment. D. active government fiscal and monetary policies are needed to ensure full employment and stable prices.
A vertical FE curve indicates perfect capital mobility.
Answer the following statement true (T) or false (F)