One possible factor that may give rise to increasing returns to scale is A. specialization of...

One possible factor that may give rise to increasing returns to scale is

A. specialization of labor.

B. concave isoquants.

C. the managerial function

Solutions

Expert Solution

Increasing return to scale occurs when the output increases by greater proportion than the increase in inputs.

For example, if input increased by 2 times and it leads to increase output by more than 2 times, then it is considered as economy has experienced an increasing return to scale.

Specialization of factor production is one possible factor that give rise to increasing return to scale.

Specialization of labor in a particular good leads to increase in production of that good by an incrasing rate for each additional number of labor.

Answer: Option (A) i.e., specialization of labor

Rahul Sunny answered 1 year ago

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