David lee aemecon 2300 18 of lecture 3 decreasing

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Unformatted text preview: tricity, natural gas, water, etc.) – why? Prof. David Lee AEM/ECON 2300 19 of Lecture 3 Decreasing marginal costs most likely to occur in industries with significant economies of scale – Example: Utilities industry (electricity, natural gas, water, etc.) – why? Capital-intensive, large initial fixed investment Low transactions costs for marginal nth consumer Prof. David Lee AEM/ECON 2300 20 of Lecture 3 Much more common, though, is increasing marginal cost industry Prof. David Lee AEM/ECON 2300 21 of Lecture 3 Much more common, though, is increasing marginal cost industry – At some point as production increases, marginal costs of production increase due to costs of: training and educating workforce physical infrastructure to expand, reduce bottlenecks marketing higher pay to induce labor supply Prof. David Lee AEM/ECON 2300 22 of Lecture 3 Increasing Marginal Costs and Partial Specialization M Concave PPF B Terms of Trade (TOT) C A D PPF C Prof. David Lee AEM/ECON 2300 23 of Lecture...
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