After learning short run and long run cost functions of industries, please give

Question

After learning short run and long run cost functions of industries, please give examples of industries which belong to the increasing return to scale, decreasing return to scale, and constant return to scale respectively. Explain why your pick following to a certain type of industry as well.

After learning short run and long run cost functions of industries, please give examples of industries which belong to the increasing return to scale, decreasing return to scale, and constant return to scale respectively. Explain why your pick following to a certain type of industry as well.

Explanation / Answer

Dear sir/ madam,

Returns to scale explain the behavior of output when the quantities of all the inputs are raised simultaneously in a given proportion. These returns to scale are identified as 1. Increasing returns to scale when the total product increases in a larger proportion than the increase in inputs 2. Constant returns to scale when the total product increases in the same proportion as an increase in inputs, 3. Diminishing returns to scale when the total product increases in a lesser proportion than the increase in inputs.

Example of industries with increasing returns to scale is food industry

Example of industries with constant returns to scale is transport industry

Example of industries with diminishing returns to scale is defence industry.

By,

Nishant Bhatt

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