5. Return to scale can be explained will be help of (a) Indifference curves (b) demand curves (c) Cost curves (d) Iso product curves
Answers
iso product curves
Returns to scale is at which an output increases in response to proportional increases in all the inputs. Returns of scale can be explained with the help of Iso product curves
Iso product curves is a contour line drawn through the set of points at which the same quantity of output is produced while changing the qualities of two or more inputs.
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1) Indifference curves- An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Along the curve, the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve.
2) Demand curves- The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.
3) Cost curves- In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve.
4) Iso product curves- Thus, an Iso-product or Iso-quant curve is that curve which shows the different combinations of two factors yielding the same total product. Like, indifference curves, Iso- quant curves also slope downward from left to right. The slope of an Iso-quant curve expresses the marginal rate of technical substitution (MRTS).