# Questions tagged [economies-of-scale]

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### Why $\gamma(c,i)=cv(i)$ means diseconomies of scale?

Let's define the transaction cost of credit consumption as $\gamma(c,i)$ where $c$ is consumption and $i$ is a fraction of credit purchase. If the transaction technology does not exhibit economies of ...
1 vote
175 views

### Constant returns and (weak/strict) concavity

Suppose I have a constant returns production function $Q = f(X,Y,Z)$, where $X$, $Y$, and $Z$ are the inputs. Because of constant returns, the Hessian matrix of second-order partial derivatives (f_ij) ...
1 vote
68 views

### Why does negative derivative of AC with respect to q imply Economies of scale (Monopoly)

In the following Industrial organization exercise form Church and Ware chapter 4 exercise 2 (preliminary info: C(q) = cost function; f = fixed costs; c = marginal costs; q= quantity of goods produced)...
56 views

### What are the motivations for two non-profit Hosptials to merge?

I was reading about two non-profit hospitals (in the US) merging. Hospital A is large non-profit hospital which controls the market in its local metro area and it is acquiring Hospital B, a smaller ...
412 views

### How to calculate Returns to Scale for Translog production function with two inputs?

I have a double-log (both inputs and output in logarithmic form) translog production function with 2 inputs [with Labour and Capital]. There are two squared terms, one for each of the inputs and there ...
32 views

### 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 ...
92 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 ...
193 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 ...
1 vote
57 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 ...
727 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?
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 ...
311 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 ...
61 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 ...
169 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 ...
486 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