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How would you reconcile the findings of Yntema with those of Ezekiel and Wylie?

How would you reconcile the findings of Yntema with those of Ezekiel and Wylie?

Owlgen

1 Answer

Based on the empirical estimates of cost functions keeping in mind the time series and cross section data analysis may be made on the behavior of the firms in the short run and in the long run. Both the companies, that is, Yntema and Ezekiel and. Wylie are involved in the production of steel. And as regards their findings, Yntema has a constant MC whereas Ezekiel and Wylie has a declining MC however has large variation. The decline in the MC in case of Ezekiel and Wylie may be because of the existence of the law of diminishing marginal returns and also the fact that with low output levels, the marginal cost decreases with an increase in the output, which causes the high variation.

It is a known fact that MC indicates those costs, which are incurred in the production of the last unit of output, and thereby reducing the total output by the last unit saves the cost. And as regards, the constant MC in case of Yntema, it is represented by a constant AC as MC intersects AC at its lowest and AC never goes below MC. However, in industries like steel, substantial economies of size are present are clear representations of the fact that a large plant is most efficient.

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November 19, 2019
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