Page 201 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes scale production of can be divided into smaller parts. Workers in each part of the work to be
individualized. Workers acquire skills in that particular job, which is an increase in efficiency.
Further specialization in a particular job saves time and capital. Division of labour has opened
more opportunities for new developments. Consequently, the production cost per unit decreases.
(ii) Technical Economies: Long-term increase in the scale of production is achieved as a result
of a variety of technical avoid using automatic machines. Production costs can be reduced by
advanced technology. So technically the average cost saving decreases.
(iii) Economies of Indivisibility: According to J.S. Bain as a result of the indivisibility of the means
of production to increase the average cost goes down. Several modes of production is required
to use a certain amount, whether the output is low or high. For example, a production manager
of a large firm can use it to its full potential. However, the Production Manager of a small
firm cannot use the efficiency of the tenth part. Therefore, as the production volume increases
unshared resources are used to their full efficiency and average cost decreases.
2. Diseconomies of Scale: Long-term average cost rose to the top of the main causes of the increase in
production is due to the scale of the losses. And to coordinate the efficient management of a firm's
efficiency has its own limitations. These limits are called scale losses. As the scale of production in a firm
is contributed to a growth, division and specialization of tasks through the manager become more efficient.
But after a limit increases the difficulties associated with managing the firm. The managers' business
daily tasks gradually move away. This in turn decreases the efficiency of production and operation of
various departments. The responsibility is to pass judgment on others. The expense for paper work, travel
expenses, telephone bills increase. Occasionally coordination in various decision-making does not have
plans to employees. As a result, production decreases and average costs increase.

9.15 Long Run Marginal Cost

The difference which comes in the total cost in the long-term in producing one object less or more is
termed as long-term mariginal cost.
In the words of Ferguson, “Long-run marginal cost is the addition to total cost attributable to an
additional unit of output when all inputs are operationally adjusted.”
—Ferguson
Long-term marginal cost curve is explained by Fig. 9.16. LMC is the long-term marginal cost curve. It
first falls to become minimum and then rises.

Fig. 9.16

Y

LMC
Cost (`)

O X
Output

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