Questions tagged [economies-of-scale]
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questions
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Can an increase in demand indirectly lead to a decrease in average price due to economies of scale?
Let's say firm A produces a very niche product, that requires them to handcraft each product, and because of extremely expensive and skilled labor the production costs are extremely high. Firm A has a ...
0
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1answer
80 views
Shouldn't big tech want to split up?
This is a reference request.
Where can I find an analysis that explains why companies like Microsoft and Amazon don't split into two. At a certain point diseconomies of scale would kick in.
I would ...
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0answers
56 views
Constant returns to scale and cost function: $C(p,ty) = tC(p,y)$
How can I prove that for a production function $F:\mathbb X \rightarrow \mathbb R$ with constant returns to scale
$$\forall x\in \mathbb X, \forall t > 0: \ \ F(tx) = t F(x)$$
and with the cost ...
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27 views
How to explain the flattening of the SRAC curve?
I discovered that there is a way that Short-run average cost curve could become 'flatter' instead of shifting. Yet I cannot find an explanation of why and how it can become flatter.
For example, in ...
5
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3answers
236 views
Does returns to scale always lead to economies of scale?
I can tell the difference between returns to scale and economies of scale, but then I still don't know if returns to scale ALWAYS leads to economies of scale?
Please could you help me?
3
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1answer
50 views
Term for partial resource use economics
In economics, economies of scale are "the cost advantages that enterprises obtain due to their scale of operation" (Wikipedia/User:Loraof).
There is a common type of scaling, mostly in ...
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2answers
74 views
Mathematic notation of scale returns
I'm having trouble with returns to scale mathematical notation which i found counterintuitive even I'm fine with its definition. Any help will be very appreciated.
There are three possible types of ...
0
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1answer
31 views
What's the econ word for "Savings and efficiencies gained via consolidation"?
For example, say you had 5 kitchens making cookies in 5 parts of the city.
But, then you bought 1 big kitchen, and moved all of your 5 kitchens to this 1 big location.
Due to mass production, we ...
4
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2answers
101 views
Is there any empirical evidence for the so-called "law" of diminishing returns
The "law" of diminishing returns is usually "demonstrated" with made-up examples (programmers working on a software, farmers acquiring land...), but rarely on evidence. Is there any empirical research ...
4
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2answers
296 views
Why doesn't economy of scale bring down prices of food?
I have little to no experience in economics and would enjoy a simple answer, if possible. Additionally, I base this question on subjective data, so I might be completely wrong in my assumptions.
EDIT:...
1
vote
1answer
127 views
finding the returns to scale of a production function
Find the returns to scale for he following production function- $(x_1 + 1)^.5 (x_2)^.5$
My attempt,
Let $f(x_1,x_2)=(x_1 + 1)^.5 (x_2)^.5$
And $g(x_1,x_2)=(x_1)^.5 (x_2)^.5$
Now,
$(x_1 + 1)^.5 (x_2)^....
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2answers
132 views
Economies of scale: when is it disadvantageous?
So, I watched a video on economies of scale. It makes sense to me but I'm wondering, is there a point where say doubling the production rate makes the product even more expensive? How can I figure out ...
1
vote
2answers
52 views
Why do banks offer less interest on larger deposits?
This may be a UK only thing but...
I have noticed that it is very common to see current accounts that offer some interest on the first couple of thousand pounds deposited with them and then less ...
1
vote
1answer
389 views
Do you get economies of scope from horizontal or vertical integration?
Economies of scope: make it cheaper to produce a range of products together than produce each one on its own as company can share inputs (e.g marketing and finance) removing cost redundancy
Would ...
7
votes
3answers
821 views
Can a monopoly INCREASE the market surplus compared with a competitive market?
Monopolies are often blamed for DWLs(Dead Weight Losses), while competitive markets believed to work without DWLs (assuming zero taxes/subsidies and zero externalities).
But I think I found an ...
4
votes
1answer
111 views
Economies of scale v.s. technological change
In Greene's Econometric Analysis, 7th edition, page 355, it is written that:
A long-standing problem in the analysis of production functions has been the inability to separate economies of scale ...
1
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0answers
179 views
Relationship Input Distance Function and Output Distance Function
I was wondering if anybody knows how input distance functions (IDF) and output distance functions (ODF) relate to each other. One of the advantages of distance functions over cost and revenue ...
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1answer
766 views
Does this table show constant returns to scale? [closed]
The following table, which is part of a wider question, apparently shows constant returns to scale. My calculations do not seem to show that constant returns to scale occurs.
The correct answer is B.
...
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1answer
1k views
Diminishing returns and economies of scale
I was wondering whether these are contrary as one effectively says production becomes cheaper as production increases. To increase production you may need to upgrade from a standard machine to high ...
2
votes
2answers
493 views
Returns to scale - Constant Function
Suppose we have a production function $f(z)=2$.
I am asked to determine whether the function exhibits increasing, decreasing, constant or no returns to scale.
For $t>0$, $f(tz)=2$.
I'm not sure ...
2
votes
0answers
91 views
Economies of scale in Robinson Crusoe economy?
I encountered the following question:
Which of the following will NOT exist in a one-man economy?
1. competition
2. private property rights
3. economies of scale
Turns out the answer was 1 and 2. I ...
6
votes
1answer
5k views
Economies of Scale vs Learning Curve
Is there a difference between the meanings of the terms "economies of scale" and "learning curve"?
The term "learning curve" is being used by cost estimators and refers (more or less) to the idea ...
2
votes
1answer
2k views
Decreasing Costs, Increasing Returns to Scale, & C''(q)
Given a profit-maximizing firm with production function $f(x_1,x_2)$, I understand that we can formulate a firm's cost function $C(q)$ by using the contingent demand functions $x_1^c$ and $x_2^c$. We ...
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0answers
148 views
Returns to scale and specialization
Anyone care to explain how exactly decreasing returns to scale (DRS) can lead to specialization? Having come across a few studies showing how large farm enterprises tend to experience DRS, I came to ...
