Question : Returns to scale is a
Option 1: timeless phenomenon
Option 2: directionless phenomenon
Option 3: short-run phenomenon
Option 4: long-run phenomenon
Correct Answer: long-run phenomenon
Solution : The correct option is the long-run phenomenon .
Returns to scale are studied in the long run, where all inputs are flexible. In the long run, a company can optimise its manufacturing process by adjusting its capital, labour and other inputs. As a result, it is possible to examine the effects of changing input levels on output in greater detail, making a return-to-scale analysis relevant.
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