Question on: JAMB Economics - 2012

In the long run, all factors of production are variable. Economies of scale refer to the cost advantages that enterprises obtain due to expansion. * **Economies of scale** occur when the average cost of production decreases as the scale of production increases. * **Increasing returns to scale** is when a proportional increase in all inputs leads to a more than proportional increase in output. This concept is closely related to economies of scale. * **Decreasing returns to scale** is when a proportional increase in all inputs leads to a less than proportional increase in output. * **Diminishing returns** is a concept that applies in the short run when at least one factor of production is fixed. It describes the situation where adding more of a variable input to a fixed input results in smaller increases in output. Therefore