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Decreasing Returns to Scale in the Long Run

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In the long run, a firm is said to be experiencing decreasing returns to scale if a 10 percent increase in inputs results in:

an increase in output from 100 to 110.
a decrease in output from 100 to 90.
an increase in output from 100 to 105.
a decrease in output from 100 to 85.

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Solution Summary

This solution briefly examines the results of an increase in output to identify "decreasing returns to scale." This solution is 83 words.

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When the proportional increase in output is less than the proportional increase in input, the firm is ...

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