What causes Increasing returns to a variable factor in the production process?
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When more and more units of a variable factor is employed, while other factor remain fixed, there is an increase of production at a higher rate
Explanation:
- There is an improved organization when an increase of variable factor, holding constant the quantity of other factors.
- The output increases at a rate higher than the rate of increase in the employment of variable factor.
- As soon as there occurs shortage or a wrong combination in productive process, the marginal product begins to decline. The law of diminishing return begins to operate.
To know more about Law of diminishing returns
Law of diminishing returns refers to an eventual fall in ____________
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