The document discusses the three laws of returns to scale: 1. Increasing returns to scale occur when output increases more than proportionately to increases in inputs. This can be caused by technical and managerial indivisibilities or higher specialization. 2. Constant returns to scale occur when output increases proportionately to inputs, attributed to limits of economies of scale. 3. Decreasing returns to scale happen when output increases less than proportionately to inputs, caused by diseconomies of scale like diminishing management returns or exhausting resources.

2. The Laws Of Returns To Scale
 The laws of returns to scale explain the
behavior of output in response to a
proportional and simultaneous change in
inputs. Increasing inputs proportionately
and simultaneously is, in fact, an
expansion of the scale of production.

3.  When a firm increases both the inputs
proportionately, there are three possibilities
1. Total output may increase more than
proportionately
2. Total output may increase proportionately
3. Total output may increase less than
proportionately
Accordingly, there are three kinds of return to scale
1. Increasing returns to scale
2. Constant returns To Scale
3. Decreasing returns to scale

4. Increasing Returns to Scale
 The law of increasing returns to scale
implies that output increases more than
proportionately to the increase in input
and the rate of increase in output goes
on increasing with each subsequent
increase in input.

5. Increasing Returns to Scale

6. The Causes of Increasing Returns To
Scale
1. Technical and managerial
indivisibilities
2. Higher degree of specialization
3. Dimensional relations

7. Constant returns to scale
 When the change in output is
proportional to the change in inputs, it
exhibits constant returns to scale.

8. Constant returns to scale
 The constant returns to scale are
attributed to the limits of the economies
of scale. With expansion in the scale of
production, economies arise from such
factors as indivisibility of fixed factors,
greater possibility of specialization of
capital and labor, use of labor saving
techniques of production, etc.

9. Constant returns to scale

10. Decreasing returns to scale
The firms are faced with decreasing
returns to scale when a certain
proportionate change in inputs, k & l, lead
to less than proportionate change in
output.

11. Decreasing returns to scale

12. Causes of Diminishing return to scale
 The decreasing returns to scale are
attributed to the diseconomies of scale.
The most important factor causing this is
‘the diminishing return to management’.
Another factor is the exhaustibility of
natural resources.