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On the Measurement of Capacity Utilization

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  • Nelson, Randy A

Abstract

Capacity utilization is usually defined as the ratio of actual output to the output corresponding to (1) the minimum point on the short-run average total cost curve, and (2) the point of tangency between the long-run average total cost and short-run average total cost curves. In practice, however, capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock. This paper demonstrates how to estimate the theoretical measures of capacity utilization, and examines the correlation between three measures of capacity utilization, and the McGraw-Hill estimates of capacity utilization, using data from a sample of U.S. privately-owned electric utilities for 1961-83. Copyright 1989 by Blackwell Publishing Ltd.

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  • Nelson, Randy A, 1989. "On the Measurement of Capacity Utilization," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 273-286, March.
  • Handle: RePEc:bla:jindec:v:37:y:1989:i:3:p:273-86
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    6. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
    7. Lafontaine, Francine & White, Kenneth J., 1986. "Obtaining any Wald statistic you want," Economics Letters, Elsevier, vol. 21(1), pages 35-40.
    8. Robert L. Bishop, 1968. "The Effects of Specific and Ad Valorem Taxes," The Quarterly Journal of Economics, Oxford University Press, vol. 82(2), pages 198-218.
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