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4.2.3 Law of Constant Returns to Scale
In a production process, the increasing returns to scale is observed first. Subsequently, the expansion of scale leads to equal proportionate change in output. The phase of constant return may be fairly long in the production of many goods. When the factors of production are perfectly divisible, the firm may attain an optimum factor proportionality and constant returns to scale will prevail. |
Last modified: Wednesday, 21 December 2011, 11:24 AM