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MEASURE OF VALUE: The money function in which money is used as the common benchmark to designate the prices of goods throughout the economy. Measure of value, or unit of account, means money is functioning as the measuring unit for prices. In other words, prices of goods are stated in terms of the monetary unit. This is one of four basic functions of money. The other three are medium of exchange, store of value, and standard of deferred payment.
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                           CONSTANT RETURNS TO SCALE: A given proportional change in all resources in the long run results in the same proportional change in production. Constant returns to scale exists if a firm increases ALL resources--labor, capital, and other inputs--by 10 percent, and output also increases by 10 percent. This is one of three returns to scale. The other two are increasing returns to scale and decreasing returns to scale. Constant returns to scale results if long run production changes are greater than proportional changes in all inputs used by a firm.Suppose, for example, that The Wacky Willy Company employs 1,000 workers in a 5,000 square foot factory to produce 1 million Stuffed Amigos (those cute and cuddly armadillos, tarantulas, and scorpions) each month. Constant returns to scale exists if the scale of operation expands to 2,000 workers in a 10,000 square foot factory (a doubling of the inputs) and production increases to exactly 2 million Stuffed Amigos. The anticipated pattern for most production activities is that increasing returns to scale emerge for relatively small levels of production, which is then following by constant returns to scale and decreasing returns to scale. Returns to scale are the flip side of economies and diseconomies of scale. Although economies and diseconomies of scale focus on changes in average cost, returns to scale focus on production. One way to view constant returns to scale is the quantity of production or the range or production in which the forces underlying increasing returns to scale exactly balance the forces underlying decreasing returns to scale.
Recommended Citation:CONSTANT RETURNS TO SCALE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: December 6, 2023].
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The word "fiscal" is derived from a Latin word meaning "moneybag."
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"Every man must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness." -- Martin Luther King, Jr., clergyman
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MSE
Mean Square Error
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