Returns to scale

Question 1

returns to scale

Answer 1

a long run phenomenon where all FoP are variable

Question 2

increasing returns to scale

Answer 2

if the increase in the scale of all FoPs causes a more than proportionate increase in output

Question 3

decreasing returns to scale

Answer 3

if an increase in the scale of all FoPs causes a less than proportionate increase in output

Question 4

constant returns to scale

Answer 4

if an increase in the scale of all FoPs causes the same proportionate increase in output

Question 5

fixed costs

Answer 5

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

Question 6

variable costs

Answer 6

costs that relate directly to the production or sale of a product eg. raw materials packaging