Returns to scale

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5 Terms

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What’s long run returns to scale

Is the relationship in a firms output and the corresponding changes in average costs in the long run

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What’s decreasing returns to scale

When a firm increases its production scale its average cost per unit of output increases(diseconomies of scale)

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What’s increasing returns to scale

When a firms increases its production scale (output) by a certain proportion its average costs of output decreases

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What’s constant returns to scale

When increasing its production scale, its average cost per unit of output remains unchanged

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