Test 4-production function PT4 Flashcards

1
Q

economies of scale

A

the property whereby long-run ATC FALLS as the quantity of output increases.

(more efficient & specialized)

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2
Q

constant returns to scale

A

the property whereby long-run ATC stays the same as the quantity of output changes.

(output increases exactly in the same proportion in which FOP are increased.)

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3
Q

Diseconomies of scale

A

the property whereby long-run ATC rises as the quantity of output increases

(inefficient: it starts to cost more to produce an additional unit)

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