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- Title
Returns to Scale and the Spacing of Isoquants: Comment.
- Authors
Rowe, John W.; Jr.
- Abstract
Economists A.M. Levenson and B. Solon show that as input quantities are increased, isoquants become closer together, are evenly spaced, or become farther apart, as marginal returns to scale are increasing, constant, or decreasing. Spacing and marginal returns are examined along a vector with the two inputs varied by equal percentages, and the production function is assumed to display first increasing, then constant, and finally decreasing, marginal returns to scale. As early as 1911, F.Y. Edgeworth perceived that marginal returns to scale should logically be measured along the expansion path the firm actually utilizes, and not along a vector. It is the purpose of this article to examine spacing and marginal returns along both vector and isocline expansion paths. It is shown that increasing marginal returns continue on an isocline after the point of constant marginal returns has been reached along a vector. Within the region of diminishing marginal productivity for both inputs and except for the case of the squared term equal to zero, isoquants are still becoming closer together at this point on the isocline and the point of maximum marginal returns has not yet been reached.
- Subjects
MARGINAL productivity; PRODUCTION functions (Economic theory); INDUSTRIAL productivity; RATE of return; ECONOMICS; LEVENSON, A. M.; SOLON, B.; EDGEWORTH, Francis Ysidro, 1845-1926
- Publication
American Economic Review, 1968, Vol 58, Issue 3, p548
- ISSN
0002-8282
- Publication type
Article