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A platform is a hardware cum software capital

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A platformis a hardware-cum-software capital installation that has multiple produc-tion capabilitiesCO.c2scN.c2scC.c2scL.c2scU.c2scS.c2scI.c2scO.c2scN.c2scEfficient production is critical to the survival of firms. Firms that do not adopt the most efficientproduction methods are likely to be left behind by their competitors. Efficiency translates intocost considerations, and the structure of costs in turn has a major impact on market type. Somesectors of the economy have very many firms (the restaurant business or the dry-cleaning busi-ness), whereas other sectors have few (internet providers or airlines). We will see in the followingchapters how market structures depend critically upon the concept of scale economies that we havedeveloped here.
Key Termsone.pnumnine.pnumseven.pnumKE.c2scY.c2scTE.c2scR.c2scM.c2scS.c2scProduction function: a technological relationship that specifies how much output can beproduced with specific amounts of inputs.Technological efficiencymeans that the maximum output is produced with the given set ofinputs.Economic efficiencydefines a production structure that produces output at least cost.Short run: a period during which at least one factor of production is fixed. If capital is fixed,then more output is produced by using additional labour.Long run: a period of time that is sufficient to enable all factors of production to be adjusted.Very long run: a period sufficiently long for new technology to develop.Total productis the relationship between total output produced and the number of workersemployed, for a given amount of capital.Marginal product of labouris the addition to output produced by each additional worker. Itis also the slope of the total product curve.Law of diminishing returns: when increments of a variable factor (labour) are added toa fixed amount of another factor (capital), the marginal product of the variable factor musteventually decline.Average product of labouris the number of units of output produced per unit of labour atdifferent levels of employment.Fixed costsare costs that are independent of the level of output.Variable costsare related to the output produced.Total costis the sum of fixed cost and variable cost.Average fixed costis the total fixed cost per unit of output.Average variable costis the total variable cost per unit of output.Average total costis the sum of all costs per unit of output.Marginal costof production is the cost of producing each additional unit of output.
one.pnumnine.pnum8Key TermsSunk costis a fixed cost that has already been incurred and cannot be recovered, even byproducing a zero output.Increasing returns to scaleimplies that, when all inputs are increased by a given proportion,output increases more than proportionately.

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