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.
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On the other hand, fixed costs or advantages to having many researchers working on similar projects may mean that increasing returns to scale are important in the process of knowledge creation.
Increasing Returns to Scale. As a firm's output increases, the unit cost of production falls.
In such a set-up the interaction between trade costs, increasing returns to scale (at the level of the firm), and forward and backward linkages creates the possibility of cumulative causation leading to the formation of new centres of activity.
The coefficient [[Pi].sub.1] is the Verdoorn coefficient, which if significantly greater than zero implies that there are increasing returns to scale. A relatively minor problem associated with (1) concerns the definitional relationship whereby [Mathematical Expression Omitted], where [Mathematical Expression Omitted] is the growth rate of employment.
In an industrial society, increasing returns to scale technologies are common; therefore, the family production unit is less likely to be observed because it is an inefficient type of production organization which cannot benefit from economies of scale.
Technical terms--such as competition, efficiency, increasing returns to scale, and comparative advantage--are not rigorously defined by NAFTA advocates and are often grossly distorted by them in order to make their promising predictions.
[DMU.sub.0] occurs if n [summation over] j = 1 [lambda.sub.j] = 1, otherwise, n [summation over] n [summation over] j = 1 [lambda.sub.j] > 1 implies decreasing returns to scale; n [summation over] j = 1 [lambda.sub.j] < 1 implies increasing returns to scale.
The sum of the coefficients imply that it had recorded increasing returns to scale. The percentage share of factor inputs presented in the table indicated that share of wages was higher than the share of capital.
The best-known feature of Smith's account of economic growth is the division of labour, which produces increasing returns to scale (IRS).
Since ([rho] + [tau])/[rho] is always larger than 1, the above production function exhibits increasing returns to scale. The lower the value of p and the higher the value of [tau], the higher the degree of returns to scale.
Such goods are said to have increasing returns to scale in production and usually require large capital investments.
Other models suggest that there might be increasing returns to scale in the matching function--that is, the total number of matches will increase by more than the amount that the number of jobseekers and job openings has increased.