ABSTRACT
The firm can be viewed as an input-output system which converts human, physical and financial resources into goods and services in order to achieve its objectives. For some production situations the over-riding problem may be to find the best uses of fairly inflexible available inputs. A profit maximising firm will try to obtain the maximum output from a given level of inputs by using the best production techniques possible given knowledge. The manager of a manufacturing company would think of the short run as being a period which is of insufficient duration for new productive facilities to be acquired. Empirical evidence suggests that increasing returns to scale arising from these and other causes occur in many industries. The law of diminishing returns is a central concept in economic theory. The linear programming approach normally assumes constant returns to scale, in other words the technological coefficients remain fixed even if the scale of production changes
