If a firm increases all of its inputs by 10 percent and its output increases by...

Question

Question

If a firm increases all of its inputs by 10 percent and its output increases by 5 percent, then

Answer 1

Answer #1

Answer

The firm is facing decreasing return to scale

The output is increased by less than the increase in inputs.

Input increases by 10% and output increases by 5% mean the output is increasing at a decreasing rate which is called decreasing return to scale.

Answer 2

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