Wednesday, February 04, 2009

Every Once in a While, Economics Offers a Universal Truth

The relationship between productivity and costs is inverse. In other words, the higher the productivity of workers, the lower the cost to produce the thing, whatever it is. Economies of scale are the consequences of specialization of labor and management, more efficient capital, and spreading costs among units of output. The minimum efficient scale is the lowest level of output at which a firm's long run average total cost is at a minimum.

There is a point, however, when a company can get so large as to become ineffient, disorganized and uncoordinated. This is called diseconomy of scale.

The conclusion?


I don't know about you, but I've been saying THAT for YEARS!

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