Question:
Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R. Assertion A: There are increasing return to scale, if output become more than doubles when inputs are doubled. Reason R: Large scale of operation allows managers and workers to specialised in their tasks.
Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R. Assertion A: There are increasing return to scale, if output become more than doubles when inputs are doubled. Reason R: Large scale of operation allows managers and workers to specialised in their tasks.
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Increasing returns to scale means output increases more than the increase in inputs. Specialisation and economies of scale are major reasons for it.
Updated On: May 22, 2026
- Both A and R are correct and R is the correct explanation of A
- Both A and R are correct but R is NOT the correct explanation of A
- A is correct but R is not correct
- A is not correct but R is correct
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The Correct Option is A
Solution and Explanation
Concept: Returns to scale show how output changes when all inputs are increased in the same proportion.
Step 1: Understand increasing returns to scale.
Increasing returns to scale occur when output increases by more than the proportionate increase in inputs. \[ \text{Inputs doubled} \Rightarrow \text{Output more than doubled} \] So Assertion A is correct.
Step 2: Understand the role of large scale operations.
Large scale operations allow division of labour, specialisation, better management, and better use of machinery. \[ \text{Large scale} \Rightarrow \text{Specialisation} \Rightarrow \text{Higher efficiency} \] So Reason R is also correct.
Step 3: Check whether R explains A.
Reason R explains why increasing returns to scale can occur. Specialisation of managers and workers increases productivity, which can make output rise more than proportionately. Therefore, both A and R are correct and R is the correct explanation of A.
Step 1: Understand increasing returns to scale.
Increasing returns to scale occur when output increases by more than the proportionate increase in inputs. \[ \text{Inputs doubled} \Rightarrow \text{Output more than doubled} \] So Assertion A is correct.
Step 2: Understand the role of large scale operations.
Large scale operations allow division of labour, specialisation, better management, and better use of machinery. \[ \text{Large scale} \Rightarrow \text{Specialisation} \Rightarrow \text{Higher efficiency} \] So Reason R is also correct.
Step 3: Check whether R explains A.
Reason R explains why increasing returns to scale can occur. Specialisation of managers and workers increases productivity, which can make output rise more than proportionately. Therefore, both A and R are correct and R is the correct explanation of A.
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