Question

__________ scale exist when inputs are increased by some percentage and output increases by a smaller percentage, whereas __________ scale exist when inputs are increased by some percentage and output increases by the same percentage.

Answer 1

Answer:

DISECONOMIES OF scale exist when inputs are increased by some percentage and output increases by a smaller percentage, whereas CONSTANT RETURNS OF scale exist when inputs are increased by some percentage and output increases by the same percentage.

Explanation:

In microeconomics, diseconomies of scale happen when you need more inputs to produce the same amounts of output. This concept follows the theory of decreasing marginal returns, since a 1% increase in inputs produces a smaller than 1% increase in output.

Constant returns of scale happen when you need the same amount of inputs to produce a constant amount of output, a 1% increase in inputs results in a 1% increase in outputs.