Returns to Scale, Economies of Scope and Monopoly Power

Lecture slides on long-run production, starting from returns to scale measured as the percentage change in output against the percentage change in inputs: increasing returns where output rises faster than inputs and long-run average cost falls, decreasing returns where it rises more slowly and average cost climbs, and constant returns where the two move together and average cost holds. Scale economies are then classified into bulk purchasing and the monopsony power it gives a buyer of components, access to cheaper finance through lower interest rates, share issues and corporate bonds, and learning economies from length of experience in a market. Economies of scope are separated from economies of size with worked examples of shared production facilities and multi-brand ownership, and the deck ends on the way economies of scale can build monopoly power, and on the diseconomies that raise long-run average cost once a firm expands beyond its optimum scale.