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Returns To Scale, Now With More Chocolate…

August 29th, 2016 · 1 Comment
Econ 101 · Production

Technically, “constant returns to scale” describes a production process where you get exactly twice as much stuff out if you put twice as much stuff in. Economists often argue that at least constant returns to scale should be achievable since, worst case scenario, you could just build a second identical factory next to the first one. As such, I want economic instructors to start using this as their example of constant returns to scale.

Alternatively, you could examine the economics of chocolate more directly. Mmmmmmmmm…

Tags: Econ 101 · Production

1 response so far ↓

  • 1 Jeff Ryan // Aug 30, 2016 at 11:34 am

    Since the second factory wouldn’t need a transportation corridor as complex as that necessary for the first factory, isn’t the second Twix factory an example of economies of scale?

    Minor point. Overall, your post was SWEET!

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