Abstract
The shape of the average-cost curve is determined by the relationship between total cost and the scale of output. The U-shaped average-cost curve which appeared in the traditional models of perfect competition and monopoly reflected the assumption that a firm would initially have access to economies of scale, but that after a time any further expansion of output would cause average cost to rise as diseconomies of scale set in.
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Notes and References
See, for example, R. S. Koot and D. A. Walker, Journal of Industrial Economics (Apr 1970) and A. A. Walters, Econometrica (Jan–Apr 1963). A summary is contained in Hawkins, Theory of the Firm, pp. 48–9.
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© 1976 P. J. Curwen
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Curwen, P.J. (1976). Economies of Scale and Average Cost. In: The Theory of the Firm. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-15645-0_12
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DOI: https://doi.org/10.1007/978-1-349-15645-0_12
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-333-18847-7
Online ISBN: 978-1-349-15645-0
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