Returns to scale Flashcards
1
Q
returns to scale
A
a long run phenomenon where all FoP are variable
2
Q
increasing returns to scale
A
if the increase in the scale of all FoPs causes a more than proportionate increase in output
3
Q
decreasing returns to scale
A
if an increase in the scale of all FoPs causes a less than proportionate increase in output
4
Q
constant returns to scale
A
if an increase in the scale of all FoPs causes the same proportionate increase in output
5
Q
fixed costs
A
cost that does not vary as the level of output changes in the short run. fixed costs have to be paid no matter the sales achieved eg. rent
6
Q
variable costs
A
costs that relate directly to the production or sale of a product eg. raw materials packaging