● When a variable factor increases, given the number of fixed factors, the resultant increase in output is called returns to a factor.
● With the employment of more and more units of the variable factor along with the given fixed factor, MP increases and hence TP increases at an increasing rate. This is called Increasing returns to a factor.
● The Total product increases at an increasing rate and the Marginal product also increases.
The two reasons behind increasing returns to a factor are:
a) Better utilization of fixed factors: There are some factors of production which are indivisible. They can only be used efficiently if employed fully.
b) Division of labour: When more number of people are employed in a firm, the jobs can be divided on the basis of special skills to different people. This is called specialization. This increases efficiency and production.
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