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Returns to Scale Defined

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Define returns to scale. Do you think that most
businesses are increasing, constant, or decreasing
returns to scale.

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Solution Summary

The expert defines the return to scales.

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Returns to scale are technical properties of the production function, y = f(x1, x2, ..., xn). If we increase the quantity of all factors employed by the same (proportional) amount, output will increase. The question of interest is whether the resulting output will increase by the same proportion, more than proportionally, or less than proportionally. These three basic ...

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