4.1.4.3 The law of diminishing returns and returns to scale NOTE

What is the short run in economics?

• A period where all factors of production are variable

• A period where only technology is fixed

• A period where no factors of production can be adjusted

• A period during which some factors of production are fixed

What does the long run refer to in economics?

• A period where all factors of production are fixed

• A period where only labor is variable

• A period in which all factors of production are variable

• A period where only capital is variable

What are marginal returns?

• The total output produced by a given level of input

• The decrease in output after reaching optimal production

• The output per unit of input

• The change in output resulting from a one-unit change in input

What does average returns represent in production?

• The sum of all units of output produced

• The total output divided by the change in input

• The output per unit of input

• The change in output from changing all inputs

What is described by the law of diminishing returns?

• Decrease in marginal product of a variable input as more units are added

• Proportional increase in output with increase in inputs

• Increase in output by adding more inputs indefinitely

• Constant output regardless of input increase

What occurs when a firm experiences increasing returns to scale?

• Output remains constant despite doubling inputs

• Doubling all inputs results in doubling of output

• Doubling all inputs results in less than doubling of output

• Doubling all inputs leads to more than a doubling of output

What indicates constant returns to scale?

• Output decreases when inputs are doubled

• Doubling all inputs results in a proportional increase in output

• Doubling all inputs results in more than doubling of output

• Doubling all inputs leads to less than doubling of output

What is a characteristic of decreasing returns to scale?

• Output doubles when inputs are halved

• Doubling all inputs results in a proportional increase in output

• Doubling all inputs results in more than doubling of output

• Doubling all inputs leads to less than a doubling of output

What does total returns refer to in production?

• The output per unit of input

• The additional output from increasing one unit of input

• The overall output produced by using a given quantity of input

• The decrease in output after optimal production level

What happens when marginal product begins to decrease according to the law of diminishing returns?

• Variable inputs are no longer added

• Output increases indefinitely

• All inputs are considered variable

• Fixed inputs become increasingly scarce relative to the variable input