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- Title
PROPORTIONALITY, DIVISIBILITY AND ECONOMIES OF SCALE.
- Authors
Chamberlin, Edward H.
- Abstract
This article analyzes the average cost curve of a firm, interpreted as the joint result of the proportions of factors employed and of their aggregate amount. It will be held that the common practice of treating proportions and size as separate problems has caused the theory of the subject to go seriously astray, mainly through its becoming almost entirely a theory of proportions. As a part of this development the erroneous thesis has come to be widely held that under the perfect divisibility of theory, as applied to the factors of production, there would be no economies or diseconomies of scale. From this absence of economies and diseconomies there follows directly, under the assumption of pure competition, an economy without firms. The reason is that, efficiency being the same at all outputs, the size of the firm is indeterminate. There has been concern in many quarters over the alleged propensity of the firm to disappear theoretically, and many strange and even wonderful lines of analysis owe their inspiration to it. In order to describe completely the cost conditions under which any particular good may be produced, it seems evident that thousands of average cost curves would be required.
- Subjects
ECONOMIES of scale; BUSINESS enterprises; INDUSTRIAL costs; DISECONOMIES of scale; FACTORS of production; BUSINESS
- Publication
Quarterly Journal of Economics, 1948, Vol 62, Issue 2, p229
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1883221