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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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