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JAMB Economics 2012 Question 24

Question 24

Theory of Production

If a firm doubles all inputs in the long run and the total output is less than doubled, this results in

  1. A.diminishing returns
  2. B.constant returns to scale
  3. C.increasing returns to scale
  4. D.decreasing returns to scale.
Show the answer and explanation

Answer: D (decreasing returns to scale.)

Explanation

When all inputs are doubled but output less than doubles, output rises less than in proportion: decreasing returns to scale.