Microeconomics 30 Monday, November 13, 2006

Microeconomics 30 Monday, November 13, 2006 - Monday,...

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Monday, November 13, 2006 Microeconomics Pg 280 LATC ECONOMIES OF SCALE DISECONOMICS OF SCALE CONSTANT RETURNS TO SCALE The LATC is just a summary of the firms best short turn cost possibilities ECONOMICS OF SCALE = LATC (falls, output increases What causes this? 1. Usually because higher production levels allow workers to become more specialized 2. Larger scale may allow for more sophisticated production techniques 3. Larger scale doesn’t necessary require a proportionate increase in inputs DISECONOMICS OF SCALE = LATC (rises, output increases) What causes this? 1. When firms get really large, management runs into coordination problems and they become less effective of keeping cost down CONSTANT RETURNS TO SCALE = LATC (does not vary with output) What causes this? 1. In general the firms wants to expand until it reaches the lowest point on the LATC
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Monday, November 13, 2006 MARKET STRUCTURE is the way on industry looks EXTREMELY NO COMPETITIVE COMPETITION “perfect competition”
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Microeconomics 30 Monday, November 13, 2006 - Monday,...

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