<br>What assumption concerning economies of scale will give rise to a determinant and optimal scale of the firm in Long run equilibrium in perfect competetion?
<br>Let me first explain the meaning of Economies of Scale.
<br>Economies of scale in production means that production at a larger scale (more output) can be achieved at a lower cost (i.e. with economies or savings). These occur when mass producing a good results in lower average cost.
<br>When more units of a good or a service can be produced on a larger scale, yet with (on average) less input costs, economies of scale (ES) are said to be achieved. Alternatively, this means that as a company grows, and production units increase, a company will have a better chance to decrease its costs. According to theory, economic growth may be achieved when economies of scale are realized.
<br>Economies of scale in production is equivalent to increasing returns to scale. Increasing returns to scale in production means that an increase in resource usage , by say x%, results in an increase in output by more than x%.
<br>Economies of scale are most likely to be found in industries with large fixed costs in production. Large fixed costs and hence economies of scale are prevalent in highly capital intensive industries such as chemicals, petroleum, steel, automobiles etc.
<br>Economies of scale occur within an firm (internal) or within an industry (external).
<br>When a company ...
Economic Determinant is stuided.
Economics for business
1. What are two reasons economists support free trade?
2. One of the basic economic laws is "the law of one price." It says that given certain assumptions, one would expect that if free trade is allowed, the prices of goods in countries that trade with each other should converge.
a. Can you list what three of those assumptions likely are?
b. Should the law of one price hold for labor, also? Why or why not?
c. Should it hold for capital (financial resources) more so or less so than for labor? Why or why not?