ECO206Y1 Lecture Notes - Competitive Equilibrium, Perfect Competition, Cogeneration

112 views10 pages
19 Oct 2012
School
Department
Course

Document Summary

Recall that all factors, particularly capital, are variable in the long-run. Entry into or exit from the industry by firms of the same size as existing firms. We analyze the effect of changes in the size of individual firm capital through the concept of economies of scale. Economies of scale (increasing returns to scale) occur when a % increase in all factor inputs causes a greater % increase in output. Suppose that 5 units of labour and 3 units of capital produce 100 units of output but that 10 units of labour and 6 units of capital produce 250 units of output. => 100% increase in factor inputs produces a 150% increase in output. Definition: diseconomies of scale (decreasing returns to scale) occurs when a % increase in all factors causes a smaller % increase in output. Definition: constant returns to scale occurs when a % increase in all factors causes the same % increase in output.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related textbook solutions

Related Documents

Related Questions