diminishing returns and return to scale

Question 3

what is short run?

Answer 3

the period of time where at least one factor of production is fixed

Question 4

what is long run?

Answer 4

the period of time where all factors of production are variable

Question 5

what is marginal returns?

Answer 5

refers to the additional output when increasing one unit of input(labour)while keeping all other inputs constant

Question 6

what is total returns?

Answer 6

the overall output obtained from a given level of input(units of labour)

Question 7

what is average returns?

Answer 7

the total output divided by the total input (units of labour)provides a measure of productivity and efficiency over a period.

Question 8

short run - the law of diminishing marginal returns

Answer 8

The law of diminishing returns states that as more of a variable of factors of production its added to fixed factors for e.g capital , there will initially be an increase in productivity
However there will be a point reached where adding additional factors e.g hiring another worker begin to decrease productivity due to the relationship between capital and labour

Question 9

draw the law of diminishing marginal returns diagram

Question 10

long run -returns to scale

Answer 10

refers to the relationship between inputs and outputs in the long run
Helps firms make decisions about optimal scale and size of production to maximise profitability and efficiency over the long term.

Question 11

what are the 3 possibilities regarding long- run returns to scale?

Answer 11

increase returns to scale
constant returns to scale
decreasing returns to scale

Question 12

what is increase returns to scale

Answer 12

If all the inputs are increased by a certain proportion, and the output increases by a larger proportion, there are increasing returns to scale. The firm is experiencing economies of scale, where production becomes more efficient as it grows

Question 13

constant returns to scale

Answer 13

If all inputs are increased by a certain proportion, and the output increases by the same proportion, there are constant returns to scale. The firm’s level of efficiency remains constant as it scales up production

Question 14

decreasing returns to scale

Answer 14

If all inputs are increased by a certain proportion, and the output increases by a smaller proportion, there are decreasing returns to scale. The firm is experiencing diseconomies of scale, where production becomes less efficient as it expands