Divisibility, Returns to Scale, and the Shape of the Cost Function
The neoclassical theory of production traditionally assumes, in short-run analysis of the individual firm (or process), that not all of the factors of production involved are variable. Those which represent the plant are assumed to be fixed in an absolute sense, the plant being composed of given indivisible units of capital equipment.
KeywordsCost Function Marginal Cost Production Function Fixed Factor Time Dimension
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