What is meant by increasing returns to a factor?

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Solution

Increasing returns to a factor states that after reaching a certain capacity of utilisation, any increase in the factor of production will result in decrease of the cost per unit of the additional output and the returns will be more than proportionate.

Also read:

Returns to Scale

The Law of Diminishing Marginal Product and the Law of Variable Proportions

Price Elasticity of Supply

Elasticity of Demand

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Giving reasons state the following statements whether true or false:-

(i) When there are diminishing returns to a factor total product always decreases

(ii) Total product will increase only when marginal product increases

(iii) Increase in total product always indicate that there are increasing reaturns to a factor

(iv) When there are diminishing returns to a factor, both always falls.

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