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Table of Contents
Distinguish between returns to factor and returns to scale?
The difference between returns to a factor and returns to scale are as follows –
(i) Returns to factor refers to the increases in output that result from increasing only one input, keeping other inputs fixed. But returns to scale refers to the increases in output that result from increasing all the inputs by the same proportion.
(ii) Returns to factor studies with reference to short-run period production function. But returns to scale connected with long run production function.
(iii) Under returns to factor one factor is variable, while others are fixed. On the other hand or contrary, returns to scale become operative when all factors are variable in the same proportion.
(iv) In returns to factor, there is a change in the level of production and not scale of production. But under returns to scale there is a change in scale of production.
(v) In returns to factor a rational producer aims to operate in second phase of returns to a factor where total product is maximum and marginal product of each variable product is positive.
But returns to scale, there is no special stage, which can be refered as the best phase where output always increases simultaneously increase in inputs.
FAQs
What is returns to a factor?
Returns to factor refers to the increases in output that result from increasing only one input, keeping other inputs fixed.
What is returns to scale?
Returns to scale refers to the increases in output that result from increasing all the inputs by the same proportion.
Conclusion
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