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)
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.)
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)