If a firm doubles all inputs in the long run and the total output is less than doubled, this results in
A. diminishing returns B. constant returns to scale C. increasing returns to scale D. decreasing returns to scale
Correct Answer: D
Explanation
A decreasing returns to scale occurs when the proportion of output is less than the desired increased input during the production process. For example, if input is increased by 3 times, but output is reduced 2 times, the firm or economy has experienced decreasing returns to scale.
