McqMate
| Q. |
Returns to scale is a - |
| A. | timeless phenomenon |
| B. | directionless phenomenon |
| C. | short-run phenomenon |
| D. | long-run phenomenon |
| Answer» D. long-run phenomenon | |
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Explanation: Returns to Scale refers to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production. |
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