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returns to scale


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In a productive process, the relation between an equal proportional change in all inputs and the resulting proportional change in output. If a proportional increase of λ in all inputs produces a proportional increase of λ in output, there are constant returns to scale. If output rises by a larger proportion than inputs, there are increasing returns to scale. If output rises by a smaller proportion than inputs, there are decreasing returns to scale.

Subjects: Economics.


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