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MGEC40H3 (12)

Summary of Lectures (Part 1)

7 Pages
252 Views

Department
Economics for Management Studies
Course Code
MGEC40H3
Professor
Jack Parkinson

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ECMC40 ± Lecture 2
Outline: Horizontal Boundaries (of the Firm)
1) Scale/Scope of Economies (defn + sources)
2) Learning Curve/ Learning Economies (defn + sources)
Horizontal Boundaries ± refer to the amount of output. Product the firm makes
- Ex: how much of the product market it serves (market share)
Vertical Boundaries ± refer to the portion of the output (along the chain of production) that the
firm does for itself (rather than outsourcing)
- Ex: part of a pen ± ³WKHSODVWLFKRZPXFKLVRXWVRXUFHG"
ECMC40 ± Lecture 3
Last Week:
Outline
1) Sources of Diseconomies (of scale/scope)
2) Vertical Boundaries of the firm
- Vertical Chain of Production
- Upstream/Downstream
- Make or Buy Decision ± Benefits & Costs of using the market
Scale economies ± static
Learning economies - flexible
Scales economies are more likely to occur more than learning economies
- Simple production process, but need large amount of capital, high fixed costs
- Ex: many automated processes, no learning needed
Learning are more likely than Scale
- Labour intensive, complex processes, not a lot of fixed costs, learning occurs
- Ex: using ones brain, experience, creativity, low cost, lots of learning
Sources of Diseconomies ± only a moment in time, the tangent hits minimum
x Rising costs as the firm gets larger due to:
o Indivisibilities ± capacity constraint with respect to K or
wrt. L, Scarce Input (ex: land)
o Conflicting out ± 6SHQGLQJWRJHWVRPHRQH¶VEXVLQHVV
Competitors, Reputation ex: Pepsi vs. Coke
o Info & Coordination Costs ± moving info around
Scale
Scope
Learning
Greater
Horizontal
Integration
Size of firms &
market structure
Firm
decisions/actions
Market
Performance
Feedback may
occur into any of
the previous
processes
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Description
ECMC40 Lecture 2 Outline: Horizontal Boundaries (of the Firm) 1) ScaleScope of Economies (defn + sources) 2) Learning Curve Learning Economies (defn + sources) Horizontal Boundaries refer to the amount of output. Product the firm makes - Ex: how much of the product market it serves (market share) Vertical Boundaries refer to the portion of the output (along the chain of production) that the firm does for itself (rather than outsourcing) - Ex: part of a pen 9K05O,89L.K4Z2:.KL84:984:7.0 ECMC40 Lecture 3 Last Week: Feedback may Scale Greater Size of firms & Firm Market occur into any of Scope Integration market structure decisionsactions Performance the previous Learning processes Outline 1) Sources of Diseconomies (of scalescope) 2) Vertical Boundaries of the firm - Vertical Chain of Production - UpstreamDownstream - Make or Buy Decision Benefits & Costs of using the market Scale economies static Learning economies - flexible Scales economies are more likely to occur more than learning economies - Simple production process, but need large amount of capital, high fixed costs - Ex: many automated processes, no learning needed Learning are more likely than Scale - Labour intensive, complex processes, not a lot of fixed costs, learning occurs - Ex: using ones brain, experience, creativity, low cost, lots of learning Sources of Diseconomies only a moment in time, the tangent hits minimum N Rising costs as the firm gets larger due to: o Indivisibilities capacity constraint with respect to K or wrt. L, Scarce Input (ex: land) o Conflicting out $503L3J94J0984204308-:8L3088 Competitors, Reputation ex: Pepsi vs. Coke o Info & Coordination Costs moving info around www.notesolution.com
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