Question

write down 10 differences between returns to factor and returns to scale​

Answer 1

Answer:

Increasing Returns to a factor : Total output tends to increase at a increasing rate when more of the variable factor is combined with the fixed factors of production.

Constant Returns to a factor : It’s a situation when increasing application of the variable factor no more results in increasing marginal product of the factor, rather marginal product of the factors tends to stabilize.

Diminishing Returns to a factor : Total output tends to increase at the diminishing rate when more of the variable factor is combined with the fixed factors of production. Marginal product of the variable factor must be

Returns to scale is a long run concept as in the long run all factors of production are variable. The response of output to changes in the scale or size of all factors in the same proportion is termed as returns to scale. It has three situations i.e.,

Increasing Returns to scale: It occurs when a given percentage increase in all factor inputs causes proportionately greater increase in output.

Constant Returns to Scale : It occurs when a gives percentage increase in all factor inputs causes equal percentage increase in output.

Diminishing Returns to Scale : It occurs when a given percentage increase in all factor inputs (in some constant ratio) cause proportionately lesser increase in output.

The main cause of the application of Returns to a factor is the variation or the change in the proportion of different factors. Whereas, Returns to scale are caused by change in the scale of production