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Increasing Returns to Scale

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PPGPortal > Home > Concept Dictionary > I, J > Increasing Returns to Scale

Increasing Returns to Scale 

If increasing all of the inputs being used for production by a certain percentage increases the amount of total output by a greater percentage than the increase in inputs, we call this the case of increasing returns to scale.

(Dwayne Benjamin, Toronto PPG 1002H)


For example, consider an oil pipeline. If we double the diameter of a pipe, we use twice as much materials, but the cross section of the pipe goes up by a factor of four. In this case, even though we have only used twice as many inputs, we have increased our output by more than 100%.


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