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

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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

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3
Q

economies of scale

A

increasing production decreases cost and increases efficiency

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4
Q

constant returns to scale

A

increasing production doesn’t change efficiency

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5
Q

diseconomies of scale

A

increasing production increases cost, typically due to failure of upscaling human management

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