Internal and External Cost Economies, and Growth

Abstract

The last chapter explored various cost economies that may be captured in the ε_TCY measure typically interpreted as a cost-side representation of scale economies. Deviations between short and long run scale economies (due to input fixities), and the impacts of jointness among quasi-fixed inputs and multiple outputs, and of market power in input markets, were elaborated. All these cost economies may be termed “internal”. They involve movements along and shifts in (or movements between) cost curves representing the technology, that stem from decisions made within, or internal to, the firm.