Law of increasing returns to scale stipulates that _________.

increase in quantity of variable input causes increase in output at an increasing rate

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increase in total inputs causes increase in output at an increasing rate

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increase in quantity of variable input causes increase in output

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all of the above

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Solution

The correct option is B increase in total inputs causes increase in output at an increasing rate
Increasing returns to scale signifies that the average cost is falling and there is a more than proportional increase in output as there is in input. The firm is usually benefiting from economies of scale at this stage.

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