When does a production function satisfy increasing returns to scale?
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When does a production function satisfy increasing returns to scale?
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Increasing returns to scale (IRS) holds when a comparable increase in all the factors of production leads to an increase in the output by more than the proportion. In other words, when increases in inputs lead to a bigger comparable increase in output, it is referred to as increasing returns to scale. For example, if both the labour and the capital are increased by 'n' times, and the resultant increase in the output is more than 'n' times, then we say that the production function exhibits IRS. 

Algebraically, IRS exists when f (nL, nK) >n. f (L, K)   

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