MGEC40H3 Study Guide - Standard Streams, Externality, Takers

150 views7 pages
user avatar
Published on 8 Nov 2010
School
UTSC
Department
Economics for Management Studies
Course
MGEC40H3
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
www.notesolution.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 7 pages and 3 million more documents.

Already have an account? Log in
www.notesolution.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 7 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Outline: horizontal boundaries (of the firm: scale/scope of economies (defn + sources, learning curve/ learning economies (defn + sources) Horizontal boundaries  refer to the amount of output. 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  905,89. 42:. 84:984:7. 0/. Outline: sources of diseconomies (of scale/scope, vertical boundaries of the firm. Make or buy decision  benefits & costs of using the market. Feedback may occur into any of the previous processes. 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. Labour intensive, complex processes, not a lot of fixed costs, learning occurs. Ex: using ones brain, experience, creativity, low cost, lots of learning.