At least one factor of production is fixed (usually capital)
Long run
All factors of production are variable.
Marginal returns
The extra output derived per extra unit of factor employed.
Average return
Output per unit of input
Total return
Total output produced by a number of units of factors over a period of time.
Diminishing returns occur in the short-run ONLY
Productivity decreases as extra workers are employed after a certain point, assuming technology stays constant.
Return to scale
Change in output of a firm after an increase in the factor inputs.
Returns to scale increase when output is greater than inputs. E.g. 2 inputs producing 4 outputs.
Returns to scale decrease when output is less than inputs. E.g. 2 inputs producing only 1 output. This is diseconomies of scale, since it occurs when the firm becomes less productive.
Constant returns to scale occurs when output=input
