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Economies of scale is related to and can easily be confused with the theoretical economic notion of returns to scale. Where economies of scale refer to a firm's costs, returns to scale describe the relationship between inputs and outputs in a long-run (all inputs variable) production function.
If only diseconomies of scale existed, then the long-run average cost-minimizing firm size would be one worker, producing the minimal possible level of output. However, economies of scale also apply, which state that large firms can have lower per-unit costs due to buying at bulk discounts (components, insurance, real estate, advertising, etc.) and can also limit competition by buying out ...
Economies of scale refers to the cost advantage arise from increasing amount of production. Mathematically, it is a situation in which the firm can double its output for less than doubling the cost, which brings cost advantages. Usually, economies of scale can be represented in connection with a cost-production elasticity, Ec. [3]
Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire market demand at a lower cost than any combination of two or more smaller, more specialized firms.
In economics, an expansion path (also called a scale line [1]) is a path connecting optimal input combinations as the scale of production expands. [2] It is often represented as a curve in a graph with quantities of two inputs, typically physical capital and labor , plotted on the axes.
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve.
In economics, the concept of returns to scale arises in the context of a firm's production function.It explains the long-run linkage of increase in output (production) relative to associated increases in the inputs (factors of production).
The Big Push Model is a concept in development economics or welfare economics that emphasizes the fact that a firm's decision whether to industrialize or not depends on the expectation of what other firms will do. It assumes economies of scale and oligopolistic market structure. It also explains when the industrialization would happen.