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Questions tagged [returns-to-scale]

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What would happen if we had decreasing returns to scale in the solow-swan growth model? Would there still be a steady state and perfect competition?

I understand with IRS we have explosive growth and a single firm would eventually dominate the market since MC < AC, and hence P < AC, so firms would leave the market. I am struggling to find ...
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Increasing marginal costs and non-universal diminishing returns

I'm an econ student and there's this question from a past exam that I don't understand: A company produces the output quantity y > 0 with fixed costs F ≥ 0 and positive marginal costs. For F > 0 ...
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Tastes in Cobb-Douglas vs CES: Different degree of homogeneity

The question has been reworded based on Giskard's comment If we have a Cobb-Douglas function: $$U_1 = x_1^{\alpha_1} x_2^{\alpha_2}$$ The degree of homogenity depends on tastes $\alpha_1$ and $\...
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Economies of Scale, texbook example

I am currently studying international economics and I'm going over economies of scale, I get the concept, but there is an example in my textbook that I don't understand. Here is a screenshot for ...
KEll's user avatar
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Is there relationship between increasing and decreasing returns to scale and homogeneity?

According to Varian's Macroeconomic Analysis (page 15), when returns to scale are constant, production function will be homogeneous of degree 1. When he discusses increasing and decreasing returns to ...
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Microeconomics exercise on returns to scale

I have an exercise in microeconomics that exhibits the following function Y = L^(1/2) * (W^(1/2) + K^(1/2)) With L = labor, K = capital, W = water In a first question, we are asked to find what the ...
taos2120's user avatar
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Connection between roundabout production and decreasing returns to scale?

I've heard the statement that roundabout production as in Basu 1995 leads to decreasing returns to scale in production. What is the connection between the two?
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