Production And Costs

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• Summary

It is a long run concept. It refers to change in output when all inputs are variable. 

1. Constant returns to scale (CRS) is a property of production function that holds when a proportional increase in all inputs results in an increase in output by the same proportion.
2. Increasing returns to scale (IRS) holds when a proportional increase in all inputs results in an increase in output by more than the proportion.
3. Decreasing returns to scale (DRS) holds when a proportional increase in all inputs results in an increase in output by less than the proportion.