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Law of Diminishing Marginal Returns
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states that as you try to expand output, your marginal productivity (the extra output associated with extra inputs) eventually declines
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Diminishing Marginal Productivity implies...
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increasing marginal cost
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Increasing marginal costs eventually lead to
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increasing average costs
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If long-run average costs are constant with respect to output, then you have
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constant returns to scale
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If long-run average costs rise with output, you have
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decreasing returns to scale or diseconomies of scale.
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If long-run average costs fall with output, you have
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increasing returns to scale or economies of scale.
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If the cost of producing two products jointly is less than the cost of producing those two products separately...
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then there are economies of scope between the two products.
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If the cost of producing two products together is higher than the cost of producing them separately
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there is diseconomies of scope
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Learning Curves
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current production lowers future costs
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