New study reveals how production costs can be optimized for efficiency.
The article explores different ways to represent production functions and cost functions in economics. By using various mathematical techniques, the researchers found that the shape of cost functions is influenced by the scale elasticity and substitution elasticity functions. They also discovered that as output increases, the scale elasticities decrease, and average cost curves have unique minima. The study used data from the US transportation equipment industry and found that average cost curves are typically U- or L-shaped.