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Production and cost — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsProduction and cost3 Marks
Question
What will be the impact on returns to factors, if the ideal factor ratio is broken?
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Answer

In production, increasing returns to factors operate when the ideal factor is achieved, however, when the ideal factor ratio is crossed, diminishing returns to factors start to operate. However, it should always be kept in mind that this law is applicable only in the short-run.

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