Variation of Cost with Output
An entrepreneur who decides to change his rate of output will have to re-examine his inputs of the factors of production. The quantities of some inputs, e.g. raw materials, may be variable within a few days; others, e.g. complex plant and machinery, may take several years. To simplify analysis, economists divide the process of adjusting factor inputs into three stages: the short run, the long run and the very long run. At any one time, the duration of these decision-making time horizons will vary from one industry to another.
KeywordsFactor Price Cost Curve Suez Canal Average Total Cost Aircraft Industry
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Sources and References
- In addition to the sources indicated in the text, the following references are of interest:Google Scholar
- H. Townsend, Scale, Innovation, Merger and Monopoly ( Oxford, 1968 ). See chap.I, ‘Economies of Large- scale Production’, which includes an elementary introduction to the problem of measuring the economies of large outputs.Google Scholar
- C. Pratten, R. M. Dean and A. Silberston, The Economies of Large-scale Production in British Industry: An Introductory Study (Cambridge, 1965). See particularly ‘The Meaning and Measurement of the Economies of Scale’, pp. 11–24.Google Scholar
- H. Speight, ‘ Cost Curves in Theory and in Practice’, Economics (autumn 5969) pp. 57–66.Google Scholar
- J. Johnston, Statistical Cost Analysis (New York, 1960). An advanced discussion of the problems of measuring the variation of cost with output, which also includes many examples of attempts to quantify cost curves.Google Scholar