When rms will confront decreasing returns to scale

Reference no: EM13204717

Economists classify production functions as possessing constant, decreasing or increasing returns to scale. Yet, from a cause-and-effect point of view, it is not readily apparent why decreasing returns to scale should ever exist. That is, if we duplicate an activity we ought to get duplicate results. Hence, if we truly duplicate all of the inputs, we ought to get double the output. Can you reconcile the apparent contradiction between this logic and the expectation of the economist that beyond certain output ranges ? rms will confront decreasing returns to scale?

Reference no: EM13204717

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