What are the possibilities of returns to scale in production, Microeconomics

What are the possibilities of returns to scale in production technology?

Three possibilities are there as: technology exhibits (a) constant returns to scale; (b) decreasing returns to scale, and (c) increasing returns to scale. Properly, we have (global) returns to scale. There production function f (x) is demonstrates as:

a. constant returns to scale when f (tx) = tf (x) for all t > 0;

b. decreasing returns to scale when f (tx) < tf (x) for all t > 1;

c. increasing returns to scale when f (tx) > tf (x) for all t > 1;

Posted Date: 9/9/2013 3:16:37 AM | Location : United States







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