The correct answer is: A. Indivisibility of the factors.
Increasing returns to scale occur when a firm’s output increases by more than the amount of inputs it uses. This can happen for a number of reasons, including:
- Fuller utilization of fixed factors: When a firm increases its output, it can often use its existing fixed factors more fully. For example, a factory may be able to produce more goods by running its machines longer hours or by using its existing equipment more efficiently.
- Greater specialization of factors: As a firm’s output increases, it can often specialize its factors of production more. This means that each factor can be used for the task that it is best at, which can lead to increased efficiency.
- Dimensional economies: Dimensional economies occur when the cost of producing a good or service decreases as the size of the good or service increases. For example, the cost of producing a large car is often less than the cost of producing two small cars.
Indivisibility of the factors is not a reason for increasing returns to scale. In fact, indivisibility can sometimes lead to decreasing returns to scale. This is because when a firm uses indivisible factors, it may not be able to use them efficiently. For example, a firm may have a large factory that it cannot fully utilize. This can lead to wasted resources and decreased efficiency.
In conclusion, the correct answer to the question “Which of the following is not the reason for increasing returns to scale?” is A. Indivisibility of the factors.