Which of the following describes the condition where an increase in all inputs by the same proportional factor results in an output increase of a smaller proportion?

💡 Solution & Explanation

Decreasing returns to scale occur when increasing all production inputs by a specific percentage generates a proportionately smaller increase in total output. Increasing returns generate larger output increments, while constant returns match input scaling proportionally. This economic principle helps businesses identify optimal plant sizes to avoid diseconomies of scale.