56: Long run costs and economies of scale Flashcards
1
Q
marginal decision rule
A
MPcapital / Pcapital = MPlabor / Plabor
firms will increase the factor whose marginal benefit (= marginal product) is greater
2
Q
long run average cost curve (LRATC)
A
plots the lowest possible cost in the long run for each quantity that could be produced
3
Q
economies of scale
A
increasing production decreases cost and increases efficiency
4
Q
constant returns to scale
A
increasing production doesn’t change efficiency
5
Q
diseconomies of scale
A
increasing production increases cost, typically due to failure of upscaling human management