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 Posts: 1,258 Add as FriendChallenge to a DebateSend a Message 11/5/2011 12:27:59 PMPosted: 6 years agoSorry for posting a textbook question again but this question has caused quite a bit of confusion in the class. And our teacher isn't helping.If a simultaneous and equal percentage decrease in the use of all physical inputs leads to a larger percentage decrease in physical output, a firms production function is said to exhibit:decreasing return to scaleconstant return to scaleincreasing return to scalediseconomies of scale
 Posts: 11,204 Add as FriendChallenge to a DebateSend a Message 11/5/2011 2:45:57 PMPosted: 6 years agoIncreasing economics of scale.Open borders debate: http://www.debate.org...
 Posts: 5,387 Add as FriendChallenge to a DebateSend a Message 11/5/2011 3:41:44 PMPosted: 6 years agoIncreasing return to scale
 Posts: 1,258 Add as FriendChallenge to a DebateSend a Message 11/7/2011 5:49:48 AMPosted: 6 years agoYeah and that would be because if you increase the input by the same amount, the output would increase by a greater percentage, right? Because the others are arguing that the average cost in this case rises, which occurs in decreasing return to scale, and our teacher is kinda siding with them.
 Posts: 15,380 Add as FriendChallenge to a DebateSend a Message 11/8/2011 3:41:36 PMPosted: 6 years agoAt 11/7/2011 5:49:48 AM, gerrandesquire wrote:Yeah and that would be because if you increase the input by the same amount, the output would increase by a greater percentage, right? Because the others are arguing that the average cost in this case rises, which occurs in decreasing return to scale, and our teacher is kinda siding with them.AC rises when production decreases or increases?Pizza. I have enormous respect for Pizza.
 Posts: 1,548 Add as FriendChallenge to a DebateSend a Message 11/8/2011 4:13:48 PMPosted: 6 years agoCall the initial amount of input X and the initial amount of output Y.Input X is decreased by a factor of n, to X'. Subsequently, output Y is decreased by a factor of m, to Y'. m > n.Now, at initial input and output X' and Y', the company increases input by a factor of n, and the input rises to X. Since input X results in output Y, our output is Y. Hence, Y' increased to Y, which we know is a factor of m. We know that m > n.Therefore, increasing returns to scale.I dunno how rigorous that was and it was kind of cumbersome, but something like that might help others realize.
 Posts: 1,258 Add as FriendChallenge to a DebateSend a Message 11/9/2011 10:27:39 AMPosted: 6 years agoAt 11/8/2011 4:13:48 PM, LeafRod wrote:Call the initial amount of input X and the initial amount of output Y.Input X is decreased by a factor of n, to X'. Subsequently, output Y is decreased by a factor of m, to Y'. m > n.Now, at initial input and output X' and Y', the company increases input by a factor of n, and the input rises to X. Since input X results in output Y, our output is Y. Hence, Y' increased to Y, which we know is a factor of m. We know that m > n.Therefore, increasing returns to scale.I dunno how rigorous that was and it was kind of cumbersome, but something like that might help others realize.Thank you. I understand this, I even presented almost the same argument to the class, and they understood but they are bringing cost into the equation. Basically, they are saying that if the input falls by x and output falls by amount more than x, that would imply that the average cost would rise, which would imply diseconomies of scale. I just can't find the kink in their argument. Diseconomies of scale and increasing return to scale cannot occur simultaneously, can it?
 Posts: 1,548 Add as FriendChallenge to a DebateSend a Message 11/24/2011 1:00:03 PMPosted: 6 years agohttp://en.wikipedia.org...Well, according one of the sections there, they might actually have a point. But with the information you've given I don't see how you could use that kind of cost information. You can only do a more simple analysis with what we have.