If a firm doubles all inputs in the long run and the total output is less than doubled; this results in?

A. diminishing returns
B. constant returns to scale
C. increasing returns to scale
D. decreasing returns to scale

Correct Answer:

Option D – decreasing returns to scale

Explanation

A decreasing return to scale occurs when the proportion of output is less than the desired increased input during the production process. For example, if the input is increased by 3 times, but the output is reduced 2 times, the firm or economy has experienced decreasing returns to scale.