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    Theory of diminishing returns

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    Indicate whether each of the following statements is true or false and give the reason. (a) A firm should stop expanding output after reaching diminishing returns and (b) if large and small firms operate in the same industry, we must have constant returns to scale.

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    a) False,

    a firm should stop expanding output when marginal revenue = marginal cost.

    b) Not always true.

    Consider an economy of ...

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    Theory of diminishing returns