Question

What is the law of increasing returns to factor?

What is meant by increasing returns to a factor?

Answer 1

Increasing returns to a factor means that adding more of a variable factor, along with a fixed factor, boosts total output more and more. In other words, the marginal product of the variable factor rises as you use more of it. In this case, total output rises faster as more units of the variable factor are added to a fixed factor.