Question on: JAMB Economics - 2012
If a firm doubles all inputs in the long run and the total output is less than doubled, this results in
A
diminishing returns
B
constant returns to scale
C
increasing returns to scale
D
decreasing returns to scale
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Correct Option: D
Decreasing returns to scale occurs when a firm increases all inputs by a certain percentage, and the output increases by a smaller percentage. In the long run, all factors of production are variable. If doubling inputs leads to less than double the output, then the firm is experiencing decreasing returns to scale.
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