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Questions tagged [economies-of-scale]

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What are the best criticisms of economies of scale? [duplicate]

What are the best criticisms of economies of scale—the notion that bigger, centralized industries are actually more efficient than smaller, decentralized ones? Which economists historically opposed ...
Geremia's user avatar
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1 answer
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Economies of Scale, texbook example

I am currently studying international economics and I'm going over economies of scale, I get the concept, but there is an example in my textbook that I don't understand. Here is a screenshot for ...
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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 ...
guest's user avatar
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1 vote
1 answer
194 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) ...
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1 answer
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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)...
Adriano Pollio's user avatar
2 votes
1 answer
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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 ...
irritable_phd_syndrome's user avatar
0 votes
1 answer
546 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 ...
Bhagirath Baria's user avatar
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0 answers
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 ...
fish_42069's user avatar
0 votes
1 answer
99 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 ...
jrudd's user avatar
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5 votes
0 answers
277 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 ...
user270396's user avatar
1 vote
0 answers
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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 ...
brikas's user avatar
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6 votes
3 answers
890 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?
Katie's user avatar
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1 answer
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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 ...
Ynhockey's user avatar
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1 vote
2 answers
551 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 ...
Marc's user avatar
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1 answer
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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 ...
tdog2's user avatar
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4 votes
2 answers
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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 ...
Arthur's user avatar
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4 votes
2 answers
540 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:...
GammaSQ's user avatar
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1 answer
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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)^....
Chd's user avatar
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1 vote
2 answers
149 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 ...
Caters's user avatar
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1 vote
2 answers
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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 ...
Mick's user avatar
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1 vote
1 answer
494 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 ...
Amelia's user avatar
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8 votes
3 answers
1k 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 ...
KarmaPeasant's user avatar
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4 votes
1 answer
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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 ...
yurnero's user avatar
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1 vote
0 answers
206 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 ...
SWimmer8's user avatar
-2 votes
1 answer
1k 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. ...
tsp216's user avatar
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1 vote
1 answer
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 ...
SRawes's user avatar
  • 111
2 votes
2 answers
707 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 ...
Omrane's user avatar
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2 votes
0 answers
109 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 ...
Charlotte's user avatar
7 votes
1 answer
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 ...
Mathematician's user avatar
2 votes
1 answer
3k 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 ...
cpage's user avatar
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1 vote
0 answers
156 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 ...
Jack's user avatar
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