Question

Difference between returns to a variable factor and returns to scale

Answer 1

returns to the variable factor input. the rate of change of OUTPUT within the SHORT-RUN theory of supply, resulting from changes in the VARIABLE-FACTOR INPUT in a plant of a given (fixed) size. In the short run, someFACTOR INPUTS are variable but other inputs are fixed.

In economics, returns to scale and economies of scale are related but different terms that describe what happens as the scale of production increases in the long run, when all input levels including physical capital usage are variable.



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