The economies of scale curve in Figure can be represented algebraically in the equation: Average costs = a + bQ + cQ2; where Q is the quantity produced by a firm, and a, b, and c are coefficients that are estimated from industry data. For example, it has been shown that the economies of scale curve for savings and loan companies in the U.S. is: Average costs = 2.38 - .615A + .54A2, where A is a savings and loan’s total assets. Using this equation, what is the optimal size of a savings and loan?
Answer to relevant QuestionsThe learning curve depicted in Figure can be represented algebraically in the following equation: Average time to produce x units = ax-β, where x is the total number of units produced by a firm in its history, a is the ...Implementing a product differentiation strategy seems to require just the right mix of control and creativity. How do you know if a firm has the right mix? How is buying a car like and unlike vertical integration decisions?One simple way to think about relatedness is to look at the products or services a firm manufactures. The more similar these products or services are, the more related is the firm’s diversification strategy. Why or why not ...Agency theory has been criticized for assuming that managers, left on their own, will behave in ways that reduce the wealth of outside equity holders when, in fact, most managers are highly responsible stewards of the assets ...
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