T3 Long run production function

Question 1

Define Longrun production

Answer 1

As short run is limited by the fixed nature of at least one important input.

however in the Longrun such a restriction no longer exists. Production can continue to increase as imports increase. We described this as returns to scale.

Question 2

What are the three different types of return to scale

Answer 2

Constant returns to scale. CRC.
Increasing returns to scale. IRC.
Decreasing returns to scale. DRC

Question 3

What is constant returns to scale

Answer 3

Scaling all inputs up by the same percentage leads to output increasing by the same percentage

Question 4

Define increasing return to scale

Answer 4

Scaling all imports up by the same percentage leads to output increasing by greater percentage

Question 5

What is decreasing return to scale

Answer 5

Scaling all inputs up by the same percentage leads to output increasing by smaller percentage