The law of diminishing returns refers to adding more of one input while holding other inputs constant, which causes the marginal product of that input to diminish. The laws of returns to scale occur when a firm doubles all inputs, but output increases by less than double, indicating decreasing returns to scale. While diminishing returns varies a single input, returns to scale considers changes to all inputs simultaneously.
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Distinguish between law of diminishing returns and laws of returns to scal1.docx
The law of diminishing returns refers to adding more of one input while holding other inputs constant, which causes the marginal product of that input to diminish. The laws of returns to scale occur when a firm doubles all inputs, but output increases by less than double, indicating decreasing returns to scale. While diminishing returns varies a single input, returns to scale considers changes to all inputs simultaneously.
The law of diminishing returns refers to adding more of one input while holding other inputs constant, which causes the marginal product of that input to diminish. The laws of returns to scale occur when a firm doubles all inputs, but output increases by less than double, indicating decreasing returns to scale. While diminishing returns varies a single input, returns to scale considers changes to all inputs simultaneously.
The principle of diminishing returns to inputs is when more on one input is added, while other inputs are held constant, the marginal product of the input diminishes. Decreasing returns to scale is when the a firm doubles its inputs, output increases by less than double. With diminishing returns, only one input is being changed while holding the other is fixed. But for decreasing returns, both inputs may change.