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# Topic: Returns to scale

###### In the News (Sun 19 May 13)

 Returns to Scale The definition of the concept of returns in to scale in a technological sense was further discussed and clarified by Knut Wicksell (1900, 1901, 1902), P.H. Wicksteed (1910), Piero Sraffa (1926), Austin Robinson (1932) and John Hicks (1932, 1936). The accurate exercise for decreasing returns to scale in the first case is to double the number of boats and double the size of the North Sea (and thus double the number of fish). Diagramatically, the idea of different returns to scale is thus captured by the degree to which isoquants are spaced from each other as we move along the ray from the origin. cepa.newschool.edu /het/essays/product/returns.htm   (5146 words)

 CHAPTER C4. PRODUCTION IN THE LONG RUN The first case describes the analysis of returns to a variable input; the second describes returns to scale; the third describes the general situation, or variable proportions, inferences about which may be drawn from an analysis of the first two situations. This is the phenomenon of returns to scale. The analysis of returns to scale belongs to the long run; a change of a single input, given fixed quantities of other inputs, is an analysis of the short run. facweb.furman.edu /~dstanford/mecon/c4.htm   (4155 words)

 Returns to scale - Wikipedia, the free encyclopedia Economies of scale tend to occur in industries with high capital costs in which those costs can be distributed across a large number of units of production (both in absolute terms, and, especially, relative to the size of the market). It is also a justification for free trade policies, since some economies of scale may require a larger market than is possible within a particular country — for example, it would not be efficient for Liechtenstein to have its own car maker, if they would only sell to their local market. Network externalities resemble economies of scale, but they are not considered such because they are a function of the number of users of a good or service in an industry, not of the production efficiency within a business. en.wikipedia.org /wiki/Returns_to_scale   (849 words)

 Econ 310 Returns to Scale and Returns to a Factor Constant Returns to Scale: Output increases proportionately with an increase in all inputs. Returns to scale help the firm determine its optimal size, and thus is naturally a long-run question in microtheory. www.humboldt.edu /~microeco/product.htm   (2698 words)

 Economies of scale - Wikipedia, the free encyclopedia Economies of scale characterizes a production process in which an increase in the number of units produced causes a decrease in the average fixed cost of each unit. For example, imagine a production line producing widgets whereby the machinery of production costs 100 currency units a week to run and the incremental cost of each widget is one currency unit. This is, of course, an extremely simplistic example and, in real life, there are countering forces of diseconomies of scale. en.wikipedia.org /wiki/Economies_of_scale   (238 words)

 Does the Henry George Theorem provide a practical guide to optimal city size? American Journal of Economics and ...   (Site not responding. Last check: 2007-11-03) At the corresponding locally constant returns to scale allocation, the average cost of providing residents with an exogenous level of utility is minimized. Sources of spatially localized decreasing returns to scale, in addition to land scarcity, include localized disamenities such as air pollution and localized congestible facilities with increasing long-run average costs. A generic good is produced under constant returns to scale, to the sole factor, labor, of which each individual inelastically supplies one unit. www.findarticles.com /p/articles/mi_m0254/is_5_63/ai_n8642234   (889 words)

 Variable returns to scale, urban unemployment and welfare: comment. | Government from AllBusiness.com Recently, Beladi [1] explored the question of gains from trade in the presence of urban unemployment and variable returns to scale (hereafter VRS).(1) That is, using a sector-specific minimum wage model, he examined the welfare implications of free trade with those of export-promoting policies and import-substituting policies in the context of VRS. His main results are that "for a small open economy, the import-substituting policies are suboptimal when compared to free trade and the export-promoting policies are superior to free trade if elasticity of returns to scale of the agricultural sector (exportable good) is larger than or equal to that of the manufacturing sector (importable good). It is easily seen that solutions of the matrix of his appendix are nothing but those corresponding to the case of constant returns to scale. www.allbusiness.com /government/307931-1.html   (709 words)

 Economies of Scale and 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%. Another way to characterize economies of scale is with a decreasing average cost curve. Large fixed costs and hence economies of scale are prevalent in highly capital intensive industries such as chemicals, petroleum, steel, automobiles etc. internationalecon.com /v1.0/ch80/80c020.html   (446 words)

 [No title] In general, if we multiply (scale) all inputs by a factor of Z (some number greater than 0), then output is multiplied by the same factor. Constant returns to scale means that if we halve all inputs, output is halved. Conversely, if we have decreasing returns to scale, doubling the level of inputs yields less output than if we had used the old level of inputs and simply produced things twice. www.unc.edu /~woolleym/RTS.doc   (927 words)

 Increasing Returns to Scale   (Site not responding. Last check: 2007-11-03) Economists usually explain "increasing returns to scale" by indivisibility. That is, some methods of production can only work on a large scale -- either because they require large-scale machinery, or because (getting back to Adam Smith, here) they require a great deal of division of labor. Increasing Returns to Scale is also known as "economies of scale" and as "decreasing costs." All three phrases mean exactly the same. william-king.www.drexel.edu /top/Prin/txt/Cost/cost19.html   (112 words)

 Qwt User's Guide: QwtAbstractScale Class Reference The scale engine is responsible for calculating the scale division, and in case of auto scaling how to align the scale. The scale's major ticks are calculated automatically such that the number of major intervals does not exceed ticks. The scale's minor ticks are calculated automatically such that the number of minor intervals does not exceed ticks. qwt.sourceforge.net /class_qwt_abstract_scale.html   (249 words)

 SSRN-A Non-Substitution Theorem with Non-Constant Returns to Scale and Externalities by Takao Fujimoto, José Silva ... SSRN-A Non-Substitution Theorem with Non-Constant Returns to Scale and Externalities by Takao Fujimoto, José Silva Reus, Antonio Villar Notario An input-output model with non-constant returns to scale and externalities is presented, and it is shown that in this model the non-substitution theorem is still valid. Fujimoto, Takao, Silva Reus, José Angel and Villar, Antonio, "A Non-Substitution Theorem with Non-Constant Returns to Scale and Externalities". papers.ssrn.com /sol3/papers.cfm?abstract_id=650990   (208 words)

 Economies of scale definition by The Linux Information Project (LINFO) Economies of scale, also called increasing returns to scale, is a term used by economists to refer to the situation in which the cost of producing an additional unit of output (i.e., the marginal cost) of a product (i.e., a good or service) decreases as the volume of output (i.e., the scale of production) increases. These terms differ from economies of scale in that they refer to the ability to increase the number of users or the size of a system (e.g., the Internet) by adding additional hardware and/or software and without having to replace existing hardware and/or software and without incurring any large increase in average costs. Whereas economies of scale refers to a declining unit cost of output as a function of the volume of output, scalable refers to a unit cost of capacity (i.e., hardware and/or software) that is relatively constant or declines as the amount of such capacity increases. www.bellevuelinux.org /economies_of_scale.html   (2071 words)

 Scale Samples Scale Samples and the Future of Muskie Fishing in Ohio. The project is supported by anglers by sending in scale samples from the fish they catch in Ohio waters. The scale tells a lot about the fish and how well the stocked populations are thriving. web.tusco.net /ohiohuskiemuskieclub/scale.htm   (407 words)

 increasing returns to scale and Stock Trading at TradeStars + Stock Trading   (Site not responding. Last check: 2007-11-03) increasing returns to scale is available on a restricted basis. As a principle, it is to scale to place their orders over the Internet. Until the increasing returns to scale day trade call is met during this 5 day period, day trade buying power for marginable stocks is limited to twice maintenance excess, and increasing returns to scale the requirement is not a Day Trade? www.tradestars.com /content/increasing-returns-to-scale.asp   (134 words)

 Muskie Scale Sample Returns Scales are used to determine age, growth and survival of muskellunge stockings. Remove 4 to 6 scales from the area indicated on the picture. 2000 OHIO HUSKIE MUSKIE RETURNS - As of 12/31/00 home.fuse.net /rockyfmh/endangered.htm   (412 words)

 Substitution That is another illustration of the law of diminishing returns. There is an argument to be made that any business ought to have constant returns to scale if you can identify all inputs and increase them proportionately. Diminishing returns arise when an important factor or input is fixed, in that it cannot be increased along with other factors. arnoldkling.com /econ/substitution.html   (1227 words)

 Economies of Scale   (Site not responding. Last check: 2007-11-03) Economies of scale are said to exist when the average cost (AC) declines as output increased over a range of output. The generally accepted explanation for this is that AC initially declines because fixed costs are being spread over increasing output and then eventually increase as variable costs increase. Economies of scale are not limited to manufacturing; marketing, RandD, and other functions can realize economies of scale as well. faculty.msb.edu /homak/HomaHelpSite/WebHelp/Economies_of_Scale.htm   (132 words)

 Returns to Scale   (Site not responding. Last check: 2007-11-03) If an increase in all inputs in the same proportion k leads to an increase of output of a proportion less than k, we have decreasing returns to scale. If an increase in all inputs in the same proportion k leads to an increase of output in the same proportion k, we have constant returns to scale. If an increase in all inputs in the same proportion k leads to an increase of output of a proportion greater than k, we have increasing returns to scale. william-king.www.drexel.edu /top/prin/txt/MPCH/RtoS1.html   (417 words)

 SAS/ETS Examples -- Testing for Returns to Scale in a Cobb-Douglas Production Function For increasing returns, if both capital and labor are increased by a factor of n, then output increases by an amount greater than n. You are interested in determining whether the function exhibits constant returns to scale and test against the alternative that the returns are not constant. The model is clearly demonstrating constant returns to scale. support.sas.com /rnd/app/examples/ets/cobbdoug/index.htm   (1294 words)

 Lesson 11   (Site not responding. Last check: 2007-11-03) If there are increasing returns to scale, isoquants are spaced closer and closer together as more capital and labor are used. decreasing returns to scale, isoquants are spaced further and further scale and eventually decreasing returns to scale, the average and the www.georgetown.edu /poirier/micro/lessons/lesson11.html   (1093 words)

 Returns to Scale   (Site not responding. Last check: 2007-11-03) Another long-run concept is that of “returns to scale.” Returns to scale can either be decreasing, constant or increasing. If output less than doubles, returns to scale are decreasing. If output more than double, returns to scale are increasing. www.carleton.ca /vpac/110398/tsld005.htm   (54 words)

 SSRN-Monopolistic Competition, Increasing Returns to Scale, and the Welfare Costs of Inflation by Yangru Wu, Junxi Zhang This paper introduces monopolistic competition and increasing returns to scale into a monetary real business cycle (RBC) model to re-estimate the welfare costs of inflation. Moreover, the stronger the increasing returns and the less intense the competition, the higher the welfare cost. Wu, Yangru and Zhang, Junxi Jack, "Monopolistic Competition, Increasing Returns to Scale, and the Welfare Costs of Inflation" (January 1998). papers.ssrn.com /sol3/papers.cfm?abstract_id=70469   (355 words)

 pdnfcn.nb   (Site not responding. Last check: 2007-11-03) Doubling the inputs did not double the outputs, so this production function has decreasing returns to scale. But unlike the previous example, it has decreasing returns to scale. Suppose we initially have 2 units of capital and 2 units of labor. econ.ucsc.edu /faculty/ambell/pdnfcn.html   (657 words)

 INCREASING RETURNS AND MARKET STRUCTURE: EFFECTS ON INTERNATIONAL TRADE Trade results in chapter 8 generally are consistent with increasing returns to scale, and do not require monopolistic competition. Increasing returns to scale means gains from trade between identical economies. If scale economies in production outweigh factor-intensity effects, then PPF is bowed inward toward origin (production set is non-convex). tigger.uic.edu /~hroberts/IRMS.html   (1118 words)

 Returns to Scale If inputs are increased by half, economies of scale occur where a higher proportionate increase in production is achieved. Diseconomies of scale occur where output is increased by less than half. Classical economists were preoccupied with the diminishing returns to scale of land, whereas post-Marshallian studies examined increasing returns to scale. www.economyprofessor.com /economictheories/returns-to-scale.php   (117 words)

 Output Frontier and Increasing Returns to Scale This seems to be taken for granted without any reference to returns to scale. This paper focuses on the relation between returns to scale and the nature of output frontier shapes. Since output sets are non convex if at least one activity has increasing returns to scale, the DEA is showed to be inappropriate to study economic sectors facing increasing returns to scale. ideas.repec.org /p/sei/seiiwp/991001.html   (344 words)

 Increasing vs. Diminishing Returns (Alertbox Sidebar)   (Site not responding. Last check: 2007-11-03) Assuming that a manager is good at picking the most promising business opportunities to do first, it would seem that diminishing returns are a fundamental law of doing business: the first few deals skim the cream and subsequent ones have progressively less value. In traditional industries, diminishing returns set in, so getting 100% bigger may only generate, say, 90% more value. In software and other industries governed by increasing returns, getting 100% bigger may generate, say, 150% more value. www.useit.com /alertbox/increasingreturns.html   (304 words)

 EconPapers: Estimates of the Returns to Scale for US Manufacturing Abstract: This paper estimates the degree of the returns to scale for 2-digit U.S. manufacturing industries from the output-based primal and price-based dual equations implied by firms' cost-minimization problems. We find significant differences between the estimates of the returns to scale parameter derived from the primal versus the dual equations. The existence of time-varying markups reduces the incidence of significant differences in the primal versus dual returns to scale estimates for the durable goods industries but not for the non-durable goods industries. econpapers.repec.org /paper/cprceprdp/2121.htm   (321 words)

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