chapter  2
17 Pages

Cost economics for processing plants

Standard microeconomic theory tends to present cost analysis using nice smooth curves so that students can fi nd where tangencies occur and the optimal point at which to operate. Unfortunately, in the real world, not all inputs are infi nitely divisible. You cannot use one half of an assembly line; it is all or nothing. As we will see in this chapter, the fact that inputs such as workers and assembly lines come in discrete (not continuous) amounts mean that the familiar cost curves transform from their normal, smooth shapes into new shapes that resemble shoddy staircases.