The (Normal) Rate of Capacity Utilization at the Firm Level
AbstractThis paper examines the endogeneity (or lack thereof) of the rate of capacity utilization in the long run at the firm level. We provide economic justification for the adjustment of the desired rate of utilization toward the actual rate on behalf of a cost-minimizing firm after examining the factors that determine the utilization of resources. The cost-minimizing firm has an incentive to increase the utilization of its capital if the rate of the returns to scale decreases as its production increases. The theory of economies of scale provides justification for this kind of behavior. In this manner, the desired rate of utilization becomes endogenous.
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Bibliographic InfoPaper provided by Levy Economics Institute, The in its series Economics Working Paper Archive with number wp_737.
Date of creation: Nov 2012
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Kaleckian; Long Run; Economies of Scale; Utilization;
Find related papers by JEL classification:
- B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
- B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Institutional; Evolutionary
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
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