Cause for the operation of diminishing returns to scale 

As a firm expands its output, after a certain point, it encounters growing diseconomies. These diseconomies, ultimately, more than cancel out the economies of large scale production and lower down the long run average production. The economies of production are swamped by diseconomies of production. The main diseconomies are Managerial Diseconomies. These diseconomies occur primarily […]

Returns to Scale Economic Point of View

In the run all factors are variable; hence the expansion of output may be achieved by varying all factor-inputs. When we change all factor-inputs in the same proportion, the scale of production is also changed. The study of the effect of change in the scale of production on the amount of output comes under the […]