Skip to Main Content
Managerial Economics and Strategy, 2/e
book

Managerial Economics and Strategy, 2/e

by Jeffrey M. Perloff, James A. Brander
February 2016
Beginner to intermediate content levelBeginner to intermediate
500 pages
33h 40m
English
Pearson
Content preview from Managerial Economics and Strategy, 2/e

5.4 Returns to Scale

So far, we have examined the effects of increasing one input while holding the other input constant (shifting from one isoquant to another) or decreasing the other input by an offsetting amount (moving along an isoquant). We now turn to the question of how much output changes if a firm increases all its inputs proportionately. The answer helps a firm determine its scale or size in the long run.

In the long run, a firm can increase its output by building a second plant and staffing it with the same number of workers as in the first one. Whether the firm chooses to do so depends in part on whether its output increases less than in proportion, in proportion, or more than in proportion to its inputs.

Constant, Increasing, and ...

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Start your free trial

You might also like

Managerial Economics

Managerial Economics

Donald N. Stengel
Managerial Economics

Managerial Economics

Vanita Agarwal
Principles of Managerial Finance, 15th Edition

Principles of Managerial Finance, 15th Edition

Scott B. Smart, Chad J. Zutter, Lawrence J. Gitman

Publisher Resources

ISBN: 9780134472553