Returns to scale, Microeconomics

Returns to Scale

Measuring relationship between scale (size) of a firm and output

1. Increasing returns to scale: output more than doubles when all the inputs are doubled

- Larger output associated with the lower cost (or autos)

- One firm is more efficient than many (or utilities)

- The isoquants get closer together

1015_increasing return to scale.png


2. Constant returns to scale: output doubles when all the inputs are doubled.

  • Sizeof the commodity does not affect productivity
  • Can have a large number of producers
  • Isoquants are equidistant apart

    1411_decreasing return to scale.png
    3. Decreasing returns to scale: output less than doubles when all the inputs are doubled
  • Reducing efficiency with large size
  • Decrease of entrepreneurial abilities

• Isoquants become farther apart

1868_constant return to scale.png

Posted Date: 10/12/2012 1:55:52 AM | Location : United States







Related Discussions:- Returns to scale, Assignment Help, Ask Question on Returns to scale, Get Answer, Expert's Help, Returns to scale Discussions

Write discussion on Returns to scale
Your posts are moderated
Related Questions
determinate equilibrium price and quantity. if Qd=7-1/2p AND Qs=1/4P-1/2

what is the differences between utility theory, indifference theory and revealed preference theory

how the equilibrium output and price is determined in williamson model of managerial discretion?

Fiat money is what is regular in modern economic systems.  Fiat money is money that is described as legal tender by either a government or some organization with the authority to e

Fiscal Policy Fiscal policy refers to the management of government spending and tax policies to influence total desired spending so as to achieve the desired level of economic

Determinants of reserve price

in aid of a diagram explain the concept of diminishing returns in production

Ask qIf the supply and demand curves for labor are represented by the following equations: Wd= -- (1/100)Ld + 30 Ws= (1/200)Ls Ws=Wd Ld=Ld a. Graph the results and show the equili

Difficulties in Measuring Cost  1) Output data may represent an aggregate of different type of products.  2) Cost data may not include opportunity cost.   3) Allocating c

Mathematical Derivation of ordinary demand function: Here we present the mathematical and more general proof of the above result. Consider, again, the initial price income sit