Microeconomics Question 1: Explain and illustrate with diagrams the differences between diminishing marginal returns and decreasing economies of scale and cite causes and examples. Diminishing returns is the decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant. The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant, will at some point yield lower per-unit returns. It implies that there is an optimal number of any factor of production. Dimishing returns to scale measures output according to the total scale of production, the common level of all factors of production. For example, if all factors of production are increased by two, an two-fold increase in total output would be considered a constant return to scale, while anything less would be a decreasing return to scale and anything higher an increasing return to scale. Marginal returns measure changes in output according resulting from changes in individual factors of production, whereas returns to scale measure changes in output resulting from changes in all factors of production. For example, if a car company decides to hire more workers in order to increase production, it would be only be increasing one factor of production, labor, in order to do so. The additional worker's effect
Other scale economies can be Multi-Product ES (“Economies of Scope”); indeed, different types of cereals can be produced in a very similar way, not requiring different production facilities, but leveraging the existing ones. The same can also be applied to packaging/bagging, which is the main source of Economies of Scale, because the Big Three use the same
Economies of scale: Large companies can produce products at a much lower cost than small ones because the cost per unit drops as the volume of output rises
Such firms identify this optimized level of output by determining the specific point at which marginal revenue and marginal cost are equal. The value to the firm is that this knowledge tells them when they have maximized their profit making potential. Going past this point will result in a negative return.
The supply and demand simulator provides students with a real world situation of several factors within economics. The factors covered within the simulator are: microeconomics and macroeconomics principles with concepts, the shift of the supply curve and shift of the demand curve; simulator also discussed price ceilings which all affect the rent price and the occupancy rate of residents. The scenarios are based on the information of Goodlife Management within the city of Atlantis. The scenarios are based on the situations that occurred in which the user is faced with factors that influences the equilibrium such as adjusting the rental rate of the apartments in order to maximize revenue. Other
They can only produce small batches. Scale economies have brought down the unit costs of production and have fed through to lower prices for consumers. Economies of scale are a key advantage for a business that is able to grow. Most firms find that, as their production output increases, they can achieve lower costs per unit. Economies of scale are the cost advantages that a business can exploit by expanding their scale of production. The effect of economies of scale is to reduce the average (unit) costs of production.
1. Suppose that there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska the opportunity cost of producing 1 bushel of corn is 3 bushels of wheat. Present production is:
In the specific case of healthcare and marginal product, this would be the quantity of medical services divided by change in the variable input. With productivity rising to its optimal level, marginal productivity will then equal average productivity and thus average productivity is maximized. An example of this would be purchasing units of hospital beds. The more bed in inventory the more production will be realized at a certain point. Then productivity would be diminished at a rate specified above.
Economies of Scale is a phenomenon which can be described as diminishing cost per unit as a result of increased output.
a) Textbook Definition: “the PPC captures all maximum output possibilities for two (or more) goods, given
We will make these calculations automatically for each student—you don’t have to “opt in” or “opt out” of one or the other weighting. We will make certain you receive the highest grade to which you are entitled.
Downsizing, this is brought up when there is law demand for the companies’ products at a set cost. Downsizing brings to light a loss of jobs, which increases the unemployment rate and in turn effects the economy as a whole for both the working and unemployed. (Hassin, 2010). On top of that, while the organization downsizes in employees, the production requirement does not, leaving the same amount of work to be done with less manpower to achieve the task.
Also to boil down to form a question whether the scales of production effect hold?
3.Its base on given product using less of a given resources than competing entity .
“Economies of scale are unit cost reductions associated with a large scale of output” as it is able to spread over the fixed costs over a large volume of quantity (Wickramasekera, Cronk & Hill 2013 p90). “First-mover advantages are the economic and strategic advantages that accrue to early entrants into an industry and the ability to capture scale economies ahead of later
Increasing returns are the natural outcome of decreasing output costs and have external and internal factors which influence economies of scale (Ossa, n.d.). Economies of scale are influenced externally by industry size, rather than firm size and include