The period over which a firms free to vary its input of 1 FOP, but fixed inputs of the other FOP's
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Long run assumption
The period in which a firm is able to vary all inputs of FOP's
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The law of diminishing returns
When a firm increases its input of one FOp while holding inputs of the others as fixed. The firm will get diminishing marginal returns from the variable factors
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The marginal principle
The idea that each economic agent take decisions by considering the effect of small changes from the existing situation
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Economies of Scale
Occur for a firm, when an increase in the scale of production leads to production at a lower LRAC
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Internal EOS
Arise from he expansion of a firm
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What are the technical EOS
Specialisation, Indispensability, Overheads, Volume and Risk Bearing
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What is Specialisation EOS?
Specialist tasks lead to higher productivity through repetition (division of labour)
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What is indivisibility?
When pieces of equipment cannot be split up easily
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What is overhead EOS?
Economics activities which have high overehadexpenditures
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What is volume EOS?
If a container doubles in size, its volume will be more than double, making storage costs cheaper.
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What is risk bearing EOS?
Diversifyibng into several regions the firm is more likely to have more stable demand patterns.
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Economies of scope
Arising when AC falls as a firm increases output across a range of different products
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Diseconomies of scale
When the incraese in the scale of production leads to higher AC
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External EOS
When the expansion of an industry in which the firm is operating
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Minimum efficient scale
The level of output which LRAC stops falling as output increases
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