15LRHandout - 1 Units of Capital Q 1 2 4 8 10 50 100 150...

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Unformatted text preview: 1 Units of Capital Q 1 2 4 8 10 50 100 150 200 20 75 150 225 300 40 100 200 300 400 U n i t s o f L a b o r 80 125 250 375 500 Returns to Scale Returns to Scale u effect on output of increasing ALL inputs proportionately u increasing returns to scale 1 2 output increases more than proportionately typically case for small expanding firms From 1 to 2: Increasing Returns output increases in the same proportion typically case with replication of existing plants u effect on output of increasing ALL inputs proportionately u constant returns to scale Units of Capital Q 1 2 4 8 10 50 100 150 200 20 75 150 225 300 40 100 200 300 400 U n i t s o f L a b o r 80 125 250 375 500 Returns to Scale Returns to Scale 2 3 From 2 to 3: Constant Returns From 1 to 2: Increasing Returns output increases less than proportionately typically case when firm too big, problems with coordination and supervision u effect on output of increasing ALL inputs proportionately u decreasing returns to scale Units of Capital Q 1 2 4 8 10 50 100 150 200 20 75 150 225 300 40 100 200 300 400 U n i...
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This note was uploaded on 03/12/2010 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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15LRHandout - 1 Units of Capital Q 1 2 4 8 10 50 100 150...

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