returns to scale

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returns to scale

the relationship between OUTPUT of a product and the quantities of FACTOR INPUTS used to produce it in the LONG RUN. Where, for example, doubling the quantity of factor inputs used results in a doubling of output then constant returns to scale’ are experienced. Where ECONOMIES OF SCALE are present, a doubling of factor inputs results in a more than proportionate increase in output. By contrast, where DISECONOMIES OF SCALE are encountered, a doubling of factor inputs results in a less than proportionate increase in output.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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