Question: The economies of scale curve in Figure can be represented
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?
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