Tutorial 7 1 explain the difference between diminishing returns and decreasing returns to scale diminishing returns is a short-run phenomenon it applies to additions of variable inputs holding at least one input constant decreasing returns is a long-run phenomenon and applies when all inputs are varied. The relation between diminishing returns to scale and returns to a variable factor is explained with the help of figure 15 where os is the expansion path which depicts diminishing returns to scale because the segment mn om. Diminishing returns and decreasing returns to scale are two of the most important concepts in economic studies the former is referred to a position at which the firm faces a decrease in per unit production because of using an additional unit of input of one factor of production while the others stay constant.
A) diseconomies of scale is caused by coordination problems and higher input costs b) diminishing marginal returns is a long run problem caused by indivisible inputs c) diminishing marginal returns rarely occurs in the long run. The difference between marginal, average and total returns the marginal return of a factor, such as labour, is the extra output derived per extra unit of the factor employed. The laws of returns to scale are a set of three interrelated and sequential laws: law of increasing returns to scale, law of constant returns to scale, and law of diminishing returns to scale if output increases by that same proportional change as all inputs change then there are constant returns to scale (crs. In economics, diminishing returns is the decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.
The key difference between the law of diminishing returns and decreasing returns to scale is that the former is in the short run, where at least one factor of production is ﬁxed, whilst the latter is in the long. Product curves: draw a diagram depciting law of diminishing returns with a marginal product curve and average product curve what is the main difference between returns to scale and economies/diseconomies of scale falling long-run average costs as the size or scale of the firm increases. Difference between diminishing returns and dis-economies of scale diminishing returns relates to the short run – higher srac diseconomies of scale is concerned with the long run.
In the short run, the law of diminishing returns states that as more units of a variable input are added to fixed amounts of land and capital, the change in total output will first rise and then fall diminishing returns to labour occurs when marginal product of labour starts to fall. Are diminishing marginal product, increasing marginal costs and decreasing returns to scale the same thing update cancel returns to scale - the increase in output when inputs increase by factor 'x' what is the difference between diminishing marginal utility and diminishing marginal rate of substitution. The main differences between the law of diminishing returns and returns to scale are that one is a concept in the short term, while the other can only occur in the long term a firm can use both to increase output, and both can lead to unwanted negative effects, if taken too far.
Returns to scale and costs marginal cost the firm has the choice of increase velocity of production as long as marginal cost is below to price of product sell and the limit converges when both costs are equal difference between marginal cost and average cost differencebetweennet. Distinguish between diminishing returns and economies of scale (15 marks) in business economics, the short run is defined as the concept that within a certain period of time, in the future, at least one input is fixed while others are variable and the long run is defined as a period of time in which all factors of production and costs are variable the law of diminishing returns is a short run. Diminishng returns = short term = some factors are fixed diseconomies = long run concept = all factors are variable . 3) carefully explain the difference between diseconomies of scale and diminishing returns answer: diseconomies of scale means that, in the long run, average costs are rising, usually due to coordination problems or decreasing returns to scale.
Diminishing marginal returns are frequent in short run when one input (capital) is fixed and company increases the other input (labor) what happens is that with each additional unit of input (for example labor), marginal product decreases. Increasing a factor with decreasing marginal returns can have an indirect effect in increasing the marginal productivity of other factors if we increase all factors at the same time, the indirect effects may outweigh the direct effect. Diminishing returns to labour occurs when marginal product of labour starts to fall this means that total output will be increasing at a decreasing rate this means that total output will be increasing at a decreasing rate. What is the difference between diminishing returns and returns to scale how does each affect the behaviour of average what is the difference between diminishing returns and returns to scale how does each affect the behaviour of average costs diminishing returns to labour occurs when marginal product starts to fall this means that.
While economies of scale refers to the cost savings that are realized from an increase in the volume of production, returns to scale is the variation or change in productivity that is the outcome. Explain the difference between law of diminishing returns and economies of scale (10) these are economic theories that influence cost in the short run and long run respectively. The marginal product of labor is equal to what is the difference between diminishing marginal returns and diseconomies of scale diminishing marginal returns, which only apply in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors. The relation between diminishing returns to scale and return to a variable factor is explained with the help of figure 13, where os is the expansion path which depicts diminishing returns to scale because the segment mn om.