econ5 - Optimal Production Rule = or = Why are some...

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L MC,AC $ diseconomies of Scale Economies of Scale Specialization Division of Labor Managerial Inefficency Large firm take advantage Small firms take advantage Optimal Production Rule = or = Why are some isoquants more curved? the elasticity of substitution The elasticity of sub. = holding Q constant = Indicates how flexible the production process is. How easily can labor input be substituted by capital? ex) A roadside stand selling soft drinks - flexible. easily substituted by vending machines - high A trucking(?) company - need some labor in anyway. - low The (long-run) Expansion Path - the locus of optimal productions resulting form various levels of output, holding the input price ratio (/).
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Short-run expansion path long-run : a period of time sufficient to change the level of capital input. short-run : a period of time during which the capital input cannot be adjusted. The expansion path & the homothetic production function If the expansion path is a straight line, the function is said to the homothetic. Returns to Scale
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econ5 - Optimal Production Rule = or = Why are some...

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