CONSTANT RETURNS TO SCALE: A given proportionate increase in all resources in the long run results in the same proportionate increase in production. Constant returns to scale exists if a firm increases ALL resources -- labor, capital, and everything else -- by 10%, and output also increases by 10%. You might want to compare increasing returns to scale and decreasing returns to scale. Returns to scale are the flip side of economies of scale and diseconomies of scale. Although economies and diseconomies of scale focus on changes in average cost, returns to scale focus on production. See also | resources | labor | capital | increasing returns to scale | decreasing returns to scale | diseconomies of scale | economies of scale | long-run average cost | output |
