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Production Theory Long Run 5
Production Theory Long Run 5
Production
(Long-run)
Production Function with Two
Variable Inputs
Producers being rational would use that
combination of two inputs that is
economically efficient.
INPUT -A
INPUT -B
INPUT -A
INPUT -B
Properties of ISO-QUANT
C
A
P
I
T
A
L
LABOUR
POINT OF TANGENCY.
21
Long Run Production - Returns to Scale
In the long run, all factors of production are variable. How the
output of a business responds to a change in factor inputs is called
returns to scale.
22
Continued
Constant returns to scale-where a
change in all inputs leads to a proportional
change in output