Economies of Scale. Figure 7.10b illustrates the situation in which a larger plant can attain a lower minimum average cost than a smaller plant. That is, economies of scale (or increas- ing returns to scale) exist. This is evident from the fact that the larger firm's ATC curve falls below the dashed line in the graph (m, is less than c). The greater efficiency of the large factory might come from any of several sources. This is the situation Elon Musk was count- ing on for his Shanghai gigafactory.
Economies of Scale. Figure 7.10b illustrates the situation in which a larger plant can attain a lower minimum average cost than a smaller plant. That is, economies of scale (or increas- ing returns to scale) exist. This is evident from the fact that the larger firm's ATC curve falls below the dashed line in the graph (m, is less than c). The greater efficiency of the large factory might come from any of several sources. This is the situation Elon Musk was count- ing on for his Shanghai gigafactory.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 6E
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Transcribed Image Text:Economies of Scale. Figure 7.10b illustrates the situation in which a larger plant can attain
a lower minimum average cost than a smaller plant. That is, economies of scale (or increas-
ing returns to scale) exist. This is evident from the fact that the larger firm's ATC curve falls
below the dashed line in the graph (m, is less than c). The greater efficiency of the large
factory might come from any of several sources. This is the situation Elon Musk was count-
ing on for his Shanghai gigafactory.
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