Consider the following statements- 1. The increasing returns to scale imply that the marginal product of a variable factor will always increase. 2. The constant returns to scale imply that the marginal product of a variable factor will always diminish 3. Managerial diseconomies constitute an important cause of decreasing returns to scale Which of these statements is/are correct?

The correct answer is: C. 2 only

Statement 1 is incorrect. Increasing returns to scale imply that the marginal product of a variable factor will eventually increase, but not always. For example, if a firm doubles all of its inputs, it may initially experience increasing returns to scale as the firm becomes more efficient. However, as the firm continues to grow, it may eventually reach a point where it becomes more difficult to manage and coordinate the production process, leading to decreasing returns to scale.

Statement 2 is correct. Constant returns to scale imply that the marginal product of a variable factor will always remain constant. This means that if a firm doubles all of its inputs, it will also double its output.

Statement 3 is correct. Managerial diseconomies are one of the main causes of decreasing returns to scale. As a firm grows, it becomes more difficult to manage and coordinate the production process. This can lead to inefficiencies and a decrease in output.

Therefore, the only statement that is correct is statement 2.